Q1 2024 Sweetgreen Inc Earnings Call

Operator: 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 2020 earnings call.

Thank you for standing by my name is Catherine and I will be a conference operator today.

Operator: At this time I would like to welcome everyone to the Sweet Green incorporated first quarter 2020 for earnings calls.

Operator: 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 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Rebecca Nounou, VP, Head of Investor Relations. Please go ahead.

Kathleen: All lines have been placed on mute to prevent any background noise.

Rebecca Nounou: After the Speakers' remarks, there will be a question and answer session.

Rebecca Nounou: To ensure that we can accommodate as many participants as possible.

Rebecca Nounou: A question each participant limit themselves to one question and one follow up question.

Rebecca Nounou: If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

Rebecca Nounou: If you would like to withdraw your question press the star one again.

Rebecca Nounou: Thank you I would now like to turn the call over to Rebecca.

Rebecca Nounou: <unk> head of Investor Relations. Please go ahead.

Rebecca Nounou: Thank you, and good afternoon, everyone. Here with me today are Jonathan Neman, 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. However, 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.

Rebecca Nounou: Thank you and good afternoon, everyone.

Rebecca Nounou: With me today are Jonathan <unk>, co founder and Chief Executive Officer, and <unk>, Chief Financial Officer before we begin we have a couple a reminder, our earnings release is available on our website at Investor <unk> Sweet Green Dot com.

Rebecca Nounou: During this call we will be making comments of a forward looking nature. Actual result may differ materially from those expressed or implied as a result of various risks and uncertainties.

Rebecca Nounou: 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.

Rebecca Nounou: 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. With that, it's my pleasure to turn the call over to Jonathan to kick things off.

Rebecca Nounou: 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.

Jonathan: Recently, 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 afternoons press release available on our IR website.

Rebecca Nounou: It's my pleasure to turn the call over to Jonathan to kick things off.

Jonathan Neman: 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. So the results today wouldn't be possible without the hard work of our team members.

Jonathan: The momentum <unk> had at the end of 2023 is continuing to build as we begin 2024 with a focus on guest experience. We are driving growth in adjusted EBITDA profitability exceeding the high end of our first quarter guidance our strategy is working.

Jonathan Neman: We have a strong foundation to build on and multiple levers to drive long term capital efficient growth.

Jonathan Neman: As a result today would it be possible without the hard work of our team members.

Jonathan Neman: 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 things. We reported sales of $157.9 million, representing 26% year-over-year growth. Same-source sales were 5%.

Speaker Change: I wanted 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.

Jonathan Neman: We reported sales of $157 9 million, representing 26% year over year growth.

Jonathan Neman: Same store sales were 5% total digital sales represented 59% of our total first quarter revenue was 56% of those sales coming via our own digital channels.

Jonathan Neman: Total digital sales represented 59% of our total first quarter revenue, with 56% of those sales coming via our own digital channel. 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. As I shared on our last call, our strategies are simple.

Jonathan Neman: 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 Companys history.

Jonathan Neman: Restaurant level profit for the first quarter was $28 5 million and nearly 70% increase from a year ago.

Jonathan Neman: Additionally, we generated positive adjusted EBITDA for the quarter.

Jonathan Neman: 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 courtroom.

Jonathan Neman: As I shared on our last call. Our strategies are simple one continue building our brand by creating great products and guest experiences and to expand our connection to guests by building and operating great restaurants.

Jonathan Neman: Over the past year and a half we have been focused on these strategic priorities to improve our financial model with the goal of driving both revenue growth and profitability.

Jonathan Neman: Our Q1 results demonstrated revenue growth expanded margins and adjusted EBITDA profitable growth.

Jonathan Neman: Let me share some of the highlights from this quarter.

Jonathan Neman: 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 has 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.

Jonathan Neman: 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 are Q1, 2024 cohort of new restaurant openings of an average weekly revenue already outpacing the existing fleet average.

Jonathan Neman: Building on the momentum of the total Lake opening which has quickly become one of our top performing restaurants, but sounds like union location in Seattle had one of the strongest opening weeks and the Companys recent history.

Jonathan Neman: Both restaurants are operating at volumes akin to a large urban restaurant. Openings like these demonstrate that our brand has a significantly greater reach than our current physical footprint and that there is massive white space for our category-defining company. 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%.

Jonathan Neman: Both restaurants are operating at volumes akin to a large urban restaurants.

Jonathan Neman: Things 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.

Jonathan Neman: 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.

Jonathan Neman: And they delivered an average first quarter margin of 28%.

Jonathan Neman: 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 7 new Infinite Kitchen restaurants, as well as retrofit 3-4 large urban restaurants with the Infinite Kitchen. Our first retrofit will be in New York City this summer.

Jonathan Neman: 10 points above the fleet average, giving us confidence in our go forward deployment strategy.

Jonathan Neman: They also continue to demonstrate additional benefits to our operating model such as faster throughput better order accuracy portion and consistency and substantially lower team member turnover. Additionally, we continue to see higher average checks than the markets. They operate in.

Jonathan Neman: In 2024, we remain on track to open approximately 70, 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 and.

Jonathan Neman: 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 this range.

Jonathan Neman: In 2025, we plan to deploy an increasing number of new restaurants powered by the infinite kitchen.

Jonathan Neman: As we build our future real estate pipeline, we see tremendous white space opportunities across the United States in both new and existing markets.

Jonathan Neman: Starting next year, we plan to return to a growth rate of 15% to 20% new unit growth per year.

Jonathan Neman: With 2025 being at the lower end of this range in 2026 and beyond targeting the upper end of the range.

Jonathan Neman: 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. 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.

Jonathan Neman: We continue to execute our culinary roadmap to broaden our menu drive menu innovation traffic mix and check protein place continue to over index at dinner and as well in the southeast and Texas markets.

Jonathan Neman: In February we launched a test of our caramelized garlic stake across the Boston market, our caramelized garlic stake features tender cuts a grass fed steak seasoned with the garlic spice blend expertly roasted and finish in a blend of olive oil and herbs.

Jonathan Neman: Guests can order steak in any of our chef-crafted entrees, including the Steakhouse Chopped and Caramelized Garlic Steak, as well as have the option to add the new protein to any existing or customized dish. 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 StageFleetWide this past summer. As we innovate our menu, we've always believed in listening to our customers to deliver more of what our guests want.

Jonathan Neman: Can order stake in any of our chef crafted entrees, including the steakhouse chopped and caramelized garlic stake play.

Jonathan Neman: As well as have the option to add the new protein on any existing or custom item.

Jonathan Neman: During our testing phase in Boston, we saw Caramelised garlic stake become a dinnertime favorite with steak included in nearly one in five dinner orders.

Jonathan Neman: <unk> successfully completed our market test process and exceeding our internal expectations, we launched state fleet wide this past Tuesday.

Jonathan Neman: As we innovate our menu we've always believed in listening to our customers to deliver more of what our guests want.

Jonathan Neman: Incorporating steak into our menu provides customers with something they've been seeking for years. With a deep commitment to sustainable practices, finding the Sweetgreen 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.

Jonathan Neman: Incorporating staging to our menu provides customers with something they've been seeking for years with a deep commitment to sustainable practices, finding the sweet Greenway to source taken our restaurants took time.

Jonathan Neman: We're proud to introduce our 100% grass fed pasture raised stake from ranchers, who align with our commitment to high quality nourishing ingredients and high sourcing standards.

Jonathan Neman: 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 rate is 10 points higher compared to the first quarter of 2022.

Jonathan Neman: Turning to operations at.

Jonathan Neman: That sweet Green 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.

Jonathan Neman: Our organization has rallied around prioritizing the guest experience and driving throughput we've aligned.

Jonathan Neman: Our incentives around these priorities, including bonuses for our head coaches and tipping for our team members.

Jonathan Neman: As a result of the investments, we're 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.

Jonathan Neman: Our 90 day retention is 10 points higher compared to the first quarter of 2023.

Jonathan Neman: 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 up 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 teams. 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.

Jonathan Neman: Over 50% of our head coaches are internal promotions and as we move forward. Our goal is to increase this percentage.

Jonathan Neman: 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.

Jonathan Neman: We remain focused on capturing additional urban lunchtime demand, where we know we have a walkaway factor we are in.

Jonathan Neman: 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.

Jonathan Neman: 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 programs. 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.

Jonathan Neman: Over the coming quarters, there are opportunities for further labor deployment improvements by reducing time on routine and restaurant tasks and improving deployment across all day parts.

Jonathan Neman: Ross the organization, we remain focused on hospitality and operating great restaurants, leading to growth and expanding margins.

Jonathan Neman: Today's consumer is increasingly selective with how they spend their discretionary income customers are choosing sweet green given our mission driven brand unparalleled quality of our product and the value we offer with our menu innovation.

Jonathan Neman: 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 cooking every day in each of our restaurants. This dedication is our promise to you. The positive results both on the top line and our restaurant-level profitability are evidence that the investments we are making in our people, our operations, and our financial model are the right thing to do.

Jonathan Neman: Our commitment to sourcing permeates every aspect of our menu we partner with farmers, we know entrust, ensuring the highest quality ingredients and scratch Cook every day in each of our restaurants.

Jonathan Neman: This dedication is our promise to get.

Jonathan Neman: 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 am very proud of what our team has accomplished together youll see their accomplishments and the financial results today and also in the experience in our restaurants through there except.

Jonathan Neman: 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. 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. Thank you.

Mitch: <unk> hospitality high quality food we serve.

Mitch: Looking ahead, we have a massive opportunity to bring real food 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.

Jonathan Neman: Now I will turn over the call to Mitch to review our financial results in further detail.

Mitch Reback: Thank you, Jonathan, and good afternoon, everyone. As you just heard from Jonathan, the first quarter demonstrated that the groundwork we laid in 2023 is driving strong momentum across the business. Total revenue for the first quarter was $157.9 million, up from $125.1 million in the first quarter of 2023, growing 26% year-over-year. For the first quarter, same store sales grew 5% year-over-year. This consisted of a 5% benefit from menu prices and a flat traffic mix. However, same store sales sequentially improved each month within the quarter. Our Q1 traffic was impacted both by January weather and the inclusion of two additional holidays in the quarter.

Mitch: Thank you Jonathan and good afternoon, everyone. As you just heard from John the first quarter demonstrates that the groundwork related 2023 is driving strong momentum across the business.

Mitch Reback: Total revenue for the first quarter was $157 9 million.

Mitch Reback: From a $125 1 billion in the first quarter of 2023 or 26% year over year.

Mitch Reback: For the first quarter same store sales grew 5% year over year, just consisted of a 5% benefit from menu prices and flat traffic mix same store sales sequentially improved each month within the quarter.

Mitch Reback: Q1 traffic was impacted by January weather and the inclusion of two additional holidays in the quarter.

Mitch Reback: Our average unit volume in the first quarter was 2.9 million. The restaurant level profit margin in the first quarter was 18.1% compared to 13.5% a year ago. This is greater than a 400 basis point improvement from the first quarter of 2023. Our restaurant level margin of 18.1% was the result of several factors, including strong revenue growth and margin improvement in our new restaurants. The restaurants that are excluded from our comparable restaurant base, that is, the non-comping restaurants, had substantial restaurant-level profit margin expansion from the first quarter of 2023 and collectively had a margin that was close to the fleet average of 18.1%. Additionally, we saw some of our fastest sales growth in our newest markets. In particular, our new Southeast markets collectively grew double digits as they continue to accelerate their ramp.

Mitch Reback: Our average unit volume in the first quarter was $2 9 million.

Mitch Reback: Restaurant level profit margin of the first quarter was 18, 1% compared to 13, 5% a year ago.

Mitch Reback: Is greater than 400 basis point improvement from the first quarter of 2023.

Mitch Reback: Our restaurant level margin of 18, 1% was the result of several factors, including strong revenue growth and margin improvement in our new restaurants and restaurant center excluded from our comparable restaurant base that is the non comping restaurants had substantial restaurant level profit margin expansion from the first quarter.

Mitch Reback: <unk> 23, and collectively have a margin that was close to the fleet average of 18, 1%.

Mitch Reback: Additionally, we saw some of our faster sales growth in our newest markets in particular, our new southeast markets collectively grew double digits and continue to accelerate that around.

Mitch Reback: We also expanded margins across our legacy markets as a result of disciplined labor scheduling and having head coach to spend more time on the floor to improve both hospitality and guest throughput.

Mitch Reback: We continue to focus on margin expansion across our portfolio of restaurants, a fleet wide restaurant level margin on a trailing 12 month basis is running at 18, 5%.

Mitch Reback: We also expanded margins across our legacy markets as a result of disciplined labor scheduling and having head coaches spend more time on the floor to improve both hospitality and guest service. We continue to focus on margin expansion across our portfolio of restaurants. Our fleet-wide restaurant-level margin on a trailing 12-month basis is running 18.5%. Restaurant level profit for the first quarter was $28.5 million, a nearly 70% increase from a year ago. For reconciliation of restaurant level margin to comparable gap figures, please refer to the earnings release.

Mitch Reback: Restaurant level profit for the first quarter was $28 5 million and nearly 70% increase from a year ago for.

Mitch Reback: A reconciliation of restaurant level margin to comparable GAAP figures. Please refer to the earnings release.

Mitch Reback: In the first quarter of 2024, we opened six restaurants, including two in Seattle, South Lake Union, and Totem Lake, ending the quarter with a total of 227 restaurants. In 2024, we anticipate opening between 23 and 27 new restaurants, approximately seven of which will have the Infinite Kitchen. Our new restaurant openings are awaited toward the back half of the year. As Jonathan mentioned earlier, in 2025, we plan on unit growth of around 15%, accelerating towards 20% in 2026. We're pleased with the early reads from the Infinite Kitchen and our results in new markets, giving us confidence that we have the opportunity to capture the considerable white space both in existing and new markets.

Mitch Reback: And the first quarter of 2024, we opened six restaurants, including two in Seattle, South Lake Union in total Blake ending the quarter with a total of 227 restaurants.

Mitch Reback: And 2024, we anticipate opening between 23 and 27, new restaurants, approximately seven of which will contain the infinite kitchen.

Mitch Reback: Our new restaurant openings are weighted towards the back half of the year.

Mitch Reback: As Jonathan mentioned earlier in 2025, we plan on a unit growth of around 15% accelerating towards 20% in 2026.

Mitch Reback: We're pleased with the early reads from the infinite kitchen, and our results in new markets, giving us confidence that we have the opportunity to capture the considerable white space, both in existing and new markets.

Mitch Reback: Food, beverage, and packaging costs were 28% of revenue for the quarter, and an 80 basis point improvement over year over year. This improvement was primarily due to menu price increases. Labor and related expenses were 29% of revenue for the first quarter, a 240 basis point improvement year-over-year. This improvement is primarily attributable to menu price increases and improvement in labor optimization. Occupancy and related expenses were 9% of revenue, a 95 basis point improvement year over year.

Mitch Reback: Food beverage and packaging costs were 28% of revenue for the quarter, an 80 basis point improvement over general over year. This improvement was primarily due to menu price increases.

Mitch Reback: Labor and related expenses were 29% of revenue for the first quarter and 240 basis point improvement year over year. This improvement is primarily attributable to menu price increases and improvement in labor optimization.

Mitch Reback: Occupancy and related expenses were 9% of revenue and 95 basis point improvement year over year.

Mitch Reback: General and administrative expenses were $36.9 million, or 23% of revenue for the first quarter of 2024 as compared to $34.9 million, or 28% of revenue in the prior year period. This increase in general and administrative expenses was primarily due to a $5.1 million benefit received in fiscal year 2023 from the employee retention tax credit that was partially offset by a $4.6 million decrease in stock-based compensation expense. We continue to demonstrate operational leverage in the support center in the first quarter, excluding the one-time benefit of the 2023 retention credit of $5.1 million. Our support center costs grew 6% year over year as sales grew 26%. Our net loss for the quarter was $26.1 million, compared to a loss of $33.7 million in the prior year period.

Mitch Reback: General and administrative expenses were $36 9 million or 23% of revenue for the first quarter of 2024 as compared to $34 9 million or 28% of revenue in the prior year period.

Mitch Reback: This increase in general and administrative expenses was primarily due to a $5 $1 million benefit received fiscal 2023 from the employee retention tax credit that was partially offset by a $4 6 million decrease in stock based compensation expense.

Mitch Reback: We continue to demonstrate operational leverage in the support center in the first quarter, excluding the onetime benefit of 2023 retention credit of $5 1 million our support center costs grew 6% year over year as sales grew 26%.

Mitch Reback: Our net loss for the quarter was $26 1 million compared to a loss of $33 7 million in the prior year period.

Mitch Reback: The $7.6 million improvement in net loss is primarily due to a $11.6 million increase in our restaurant-level profit and a $1.9 million decrease in pre-opening costs. The increase in our restaurant-level profit and the decrease in pre-opening costs were partially offset by an increase in other expenses related to the change in fair value of our contingent consideration from our acquisition of SPICE. Increases in general and administrative expenses, as described previously, as well as an increase in depreciation and amortization associated with additional restaurants.

Mitch Reback: The $7 6 million improvement in net loss is primarily due to an $11 6 million increase in our restaurant level profit and a $1 9 million decrease in preopening costs.

Mitch Reback: The increase in our restaurant level profit and a decrease in pre opening costs were partially offset by an increase in other expenses related to the change in fair value of our contingent consideration from our procession of Spice increases in general and administrative expenses as described previously as well as an increase in depreciation.

Mitch Reback: <unk> and amortization associated with additional restaurants.

Mitch Reback: Adjusted EBITDA, which excludes stock-based compensation and certain other adjustments, was $113,000 for the first quarter, an improvement of $6.8 million from the first quarter of 2023. Adjusting for the one-time employment credit in the first quarter of 2023, our adjusted EBITDA year-over-year improvement was $11.9 million. We ended the quarter with a cash balance of $244 million.

Mitch Reback: Adjusted EBITDA, which excludes stock based compensation and certain other adjustments was 113000 for the first quarter and an improvement of $6 8 million from the first quarter of 2023.

Mitch Reback: Adjusting for the onetime employment credit in the first quarter of 2023, our adjusted EBITDA year over year improvement was $11 9 million.

Mitch Reback: We ended the quarter with a cash balance of $244 million.

Operator: Now turning to guidance. For the fiscal year 2024, we update our guidance to reflect the strength of the first quarter. 23-27 net new restaurant openings, with revenue ranging from $660 million to $675 million. Save store sales growth between 4% and 6%, restaurant level margin between 18.5% and 20%, and adjusted EBITDA between $10 million and $19 million. In closing, we saw strong revenue growth of 26%, expanded restaurant level margins by over 400 basis points, and delivered positive adjusted EBITDA of $113,000.

Mitch Reback: Now turning to guidance for the fiscal year 2024, we updated our guidance to reflect the strength of the first quarter.

Operator: 23% to 27, net new restaurant openings revenue ranging from $660 million to $675 million same.

Operator: Same store sales growth between four and 6% rest.

Operator: Our restaurant level margin between 18, 5% at 20% and adjusted EBITDA between 10 million to $19 million.

Operator: In closing, we saw strong revenue growth of 26% expanded restaurant level margins by over 400 basis points and delivered positive adjusted EBITDA of 113000.

Operator: Looking ahead, Sweetgreen remains committed to innovation, including expanding its menu offering and deploying the Infinite Kitchen. These initiatives, together with our focus on running great restaurants, are poised to drive traffic, create better customer and team member experiences, as well as unlock long-term value for our shareholders. Our unwavering focus on sustainable, profitable growth, coupled with a healthy balance sheet, positions us well for the opportunities that lie ahead. With that, I'll turn the call back to the operator to start the Q&A.

Operator: Looking ahead, <unk> remains committed to innovation, including expanding our menu offering and deploying the infinite kitchen. These initiatives together with our focus on running great restaurants are poised to drive traffic create better customer and team member experiences as well as unlocking long term value for our shareholders.

Operator: Yeah.

Operator: Our unwavering focus on sustainable profitable growth, coupled with a healthy balance sheet positions us well for the opportunities that lie ahead.

Operator: With that I'll turn the call back to the operator to start Q&A.

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. And if you would like to continue with your question, simply press star 1 again. If you are called upon to ask your question and are listening via the loudspeaker in your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Please note to limit yourself to one question and one follow-up question. Your first question comes from the line of Brian Bittner of Oppenheimer. Please go ahead.

Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in and we'd like to ask a question. Please press star one on your telephone keypad through Easter had been joined the queue.

Operator: And if you would like to withdraw your question simply press Star one again.

Operator: If you are called upon to ask your questions and listening via loud speaker in your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.

Operator: Please note the limit yourself with one question and one follow up question.

Operator: Your first question comes from the line of Brian Bittner of Oppenheimer. Please go ahead.

Mitch Reback: Thanks for taking the question. The quarter was impressive, as was the guidance raised, and I just want to dig into the update on your same store sales guidance range for 24, now 4 to 6%. At its midpoint, it would suggest the rest of the year looks very similar to 1Q, which was up 5%, and you had some tough weather in the first quarter, and now you have steak rolling out, which did not really impact the first quarter. So is there perhaps some conservatism baked into the new same store sales guidance, or is there anything else you can unpack regarding your assumptions for the remainder of the year?

Brian John Bittner: Thanks for taking the question.

Brian John Bittner: Quarter was impressive as is the guidance raise.

Mitch Reback: I just wanted to dig into the update on your same store sales guidance range for 'twenty for now 4% to 6% added.

Mitch Reback: At its midpoint it would suggest the rest of the year looks very similar to <unk>, which was up 5% and you had some tough weather in the first quarter and now you have steak rolling out which did not really impact the first quarter. So is there perhaps some conservatism baked into the new same store sales guidance or is there anything else you can.

Mitch Reback: Unpack regarding your assumptions for the remainder of the year.

Mitch Reback: Thank you, Brian, for the question. Yeah, I understand the way you're looking at it.

Speaker Change: Thank you Brian for the question.

Mitch Reback: I think what I would simply say is, if you recall, for the prior two years, as we came through the holiday periods, the company saw a lot of negative traffic, particularly starting around Memorial Day and then through the summer. And I think that really what we're doing is taking an approach that says we're uncertain as to how the holidays will impact the business. And frankly, we had a major launch, as you know, on Tuesday with Steak, and really, that factored that heavily into our guidance, given the fact that we've only had two days of history.

Speaker Change: Yes, I understand the way you are looking at it I think what I would simply say is if you recall for the prior two years as we came through the holiday periods. The company saw a lot of negative traffic.

Mitch Reback: Particularly starting around Memorial day, and then through the summer and I think that really what were doing is taking the approach that says we're uncertain as to how the holidays impact the business and frankly, we had a major launches on Tuesday would stake and really have not factored that heavily into our guidance given the fact that we've only had two days of his.

Mitch Reback: St.

Mitch Reback: That's really helpful. Thanks, Mitch.

Speaker Change: That's really helpful. Thanks, and my follow up is just.

Mitch Reback: I'm hearing a lot of positive commentary on new unit sales volumes.

Mitch Reback: And on new unit profitability more so than past earnings calls what do you believe has led to the inflection in the performance of units that are outside the comp base and how does this inform you about how youre going to open new units and the strategy behind that moving forward.

Jonathan Neman: Sure. Hi Brian.

Jonathan Neman: And my follow-up question is just, I'm hearing a lot of positive commentary on new unit sales volumes and on new unit profitability more so than on past earnings calls. What do you believe has led to the inflection in the performance of units that are outside the comp base? And, and how does this inform you about how you're going to open new units and the strategy behind that moving forward? Sure. Hi, Brian.

Mitch Reback: Sure Hi, Brian Thanks for the comments and just want to start off by thanking our team for all the amazing work with putting together a great quarter as we look at new units I think theres a few things that we've done one we've adjusted our real estate targeting and I think taking a lot of the lessons of the past and how we target real estate, especially as we look at our suburban expansion and what are the attributes.

Jonathan Neman: Thanks for the comments. And I just want to start off by thanking our team for all the amazing work in putting together a great quarter. As we look at new units, I think there are a few things that we've done. One, we've adjusted our real estate targeting, and I think taking a lot of the lessons of the past and how we target real estate, especially as we look at our suburban expansion and what the attributes are for successful stores. Secondly, we've clearly had an increase in brand awareness as we've continued to grow. And there are markets that are waiting for us to open, Seattle being a great example.

Jonathan Neman: For successful stores.

Jonathan Neman: <unk> <unk>.

Jonathan Neman: Clearly had an unlock in brand awareness as we've continued to grow.

Jonathan Neman: And there's markets that are waiting for us to open Seattle being a great example.

Jonathan Neman: I also, you know, you can see the unlock in the brand and some of the performance we've seen in some of the markets that were once struggling, places like Texas, Atlanta, and Florida. And as the brand has unlocked there, from an awareness perspective, we're seeing a lot of positive growth. We've also adjusted and taken a lot of our learnings around how we operate those restaurants, how we staff them, the head coaches that we have in charge of leading those stores, how we train them, and really the training and the internal promotion focus of bringing head coaches that understand our business, understand our culture, and having them open up those new restaurants.

Jonathan Neman: So you can see the unlock in the brand and some of the performance you've seen and some of the markets that were once struggling places like Texas, Atlanta, and Florida and as the brand has unlocked there from an awareness perspective, we're seeing we're seeing a lot of positive growth. We've also adjusted and taken a lot of our learnings around how we operate.

Jonathan Neman: Restaurants, how we staff them the head coaches.

Jonathan Neman: That we have a lead those stores, how we train them and really the training and the internal promotion focus of move bringing head coaches that understand our business understand our culture and having them open up those new restaurants, and then lastly, as we've talked about in past calls we've adjusted a lot of our.

Jonathan Neman: And then lastly, as we've talked about in previous calls, we've adjusted a lot of our marketing strategies. So, as we've shifted how we market and open new stores, as well as how we support those new restaurants, not just for the launch, but for the first 90 to, you know, three to six months, we've seen really positive results. So, we feel really good about the new stores. I think we're getting a lot of momentum here, and it gives us a lot of confidence as we look to re-accelerate our pipeline.

Jonathan Neman: <unk> strategies, so as we've shifted how we how we market and opened new stores as well as how we can support those new restaurants, not just for the launch but for the first 90 to 92.

Jonathan Neman: Three to six months, we've seen really positive results. So we feel really good about the new stores I think we're getting a lot of momentum here and it gives us a lot of confidence as we look to reaccelerate our pipeline.

Operator: Your next question comes from the line of Rahul Kroh of J.P. Morgan. Your line is now open.

Jonathan Neman: Your next question comes from the line of Rahul <unk>.

Rahul Kroh: <unk> of Jpmorgan. Your line is now open.

Operator: Good afternoon, guys, and thanks for taking my question. It's on the supply chain optimization side, and there is now an increasing focus, I think we discussed this in the past, on how certain ingredients can be less local if it's not worth the cost or quality perception. What links would you say we are on this exercise and understand it's an evolving process, but can you discuss the opportunity set with some examples currently underway, and I have a follow-up?

Rahul Kroh: Good afternoon, guys and thanks for taking my question, it's on the supply chain optimization side, and it's not an increasing focus I think we've discussed this in the bust on how certain ingredients can be less local if its not well.

Operator: Cost our quality perception.

Operator: <unk> would you say the odd on this exercise on I'm, just trying to it's an evolving process, but can you discuss the opportunity, but some examples currently underway and I have a follow up.

Jonathan Neman: Sure. Thank you. Thank you, Raul.

Speaker Change: Sure. Thank you. Thank you all so we.

Speaker Change: We're constantly looking on ways to continue to innovate our menu, both bringing new items that our guest will love, but also making it easier for our team members to execute so we can deliver on our promise every sit with every single meal and so as you know with the steak launch it was a very big launch for US first time first time, having meat on the menu very proud of the offering.

Jonathan Neman: So we're constantly looking for ways to continue to innovate our menu, both bringing new items that our guests will love but also making it easier for our team members to execute so we can deliver on our promise with every single meal. And so, as you know, with this steak launch, it was a very big launch for us. First time having meat on the menu, and I'm very proud of the offering that we put forward with grass-fed pasture-raised.

Jonathan Neman: We put forward with the grass fed pasture raised and in that process. We also simplified some of our menu. So we moved a couple of Skus and optimize the few things to continue to make it easier. So I'd say, we're always we're continuously looking at what does the customer value, where do we want to double down I'll give you. An example last year we may.

Jonathan Neman: And in that process, we also simplified some of our menus. So we removed a couple skews and optimized a few things to continue to make it easier. So I'd say we're always, you know, we're continuously looking at what is the customer value? Where do we want to double down? I'll give you an example.

Jonathan Neman: You know, last year, we made the upgrade to olive oil for all of our cooking. And then sometimes we look at something, you know, some rationalization around skews of things that are not heavily used or customers don't value. So we're going to continue to continue to look at things as things evolve. But one of our philosophies at Sweetgreen is, "How do we get better as we get bigger?".

Jonathan Neman: The upgrade to olive oil for all of our cooking and then sometimes we look at something.

Jonathan Neman: Rationalization around Skus of things that are not heavily used their customers don't value. So we're going to continue to continue to look at things as things evolve, but we like one of our philosophies of Sweet Green is how do we get better as we get bigger and so we really are looking to continue to and continue to protect our supply chain in the <unk>.

Jonathan Neman: And so we really are looking to continue to protect our supply chain and the quality of our food, because that's really what people love about us. And as we scale, we should continue to see efficiencies there.

Jonathan Neman: Alrighty of our food because thats really what people love about us and as we scale, we should continue to see efficiencies there.

Jonathan Neman: Perfect. And on a similar note, like what earnings you are on with the labor scheduling and streamlining the labor prep hours today, which I believe is 10 points of labor. You can talk from a current compliance or further opportunity standpoint on this aspect.

Speaker Change: Perfect on on a similar note like what earnings are you on.

Jonathan Neman: The labor scheduling and streamlining the labor pods today, which I believe is 10 points of labor.

Jonathan Neman: You can talk from our current plans are to plug that opportunity standpoint.

Jonathan Neman: This aspect.

Jonathan Neman: I'd say we're still very much in the early innings around labor. So I would say we've made a lot of headway, but as we've seen this quarter in Q1 and as we're starting to see in Q2, how we deploy labor not just from an efficiency perspective but to better capture peak demand and offer that hospitality that our customers expect, there is a ton of opportunity. So today we put a huge focus on both of those things, on staffing for the peak and being ready to serve as many customers as we can in those periods.

Speaker Change: I'd say, we're still very much in the early innings around labor. So I'd say, we've made a lot of headway, but as we've seen this quarter and in Q1 and as we're starting to see in Q2, how we deploy labor not just from an efficiency perspective, but to better capture peak demand and offer that hospitality that our customers.

Jonathan Neman: There is a ton of opportunity so today.

Jonathan Neman: We've put a huge focus on both of those things on staffing for the peak.

Jonathan Neman: And being ready to serve as many customers as we can in those periods, but we are looking at investments around different labor deployment systems that we think over time can continue to drive more efficiencies in how we deploy labor in the past, we've also talked about efficiencies and what we prep in restaurants, what we upstream.

Jonathan Neman: But we are looking at investments around different labor deployment systems that we think, over time, can continue to drive more efficiencies in how we deploy labor. In the past, we've also talked about efficiencies in what we prepare in restaurants, what we upstream, and how do we make it easier to make that job easier and more efficient in the back of the house. And again, we'll consistently look at both tools and products that will make it easier to provide the experience that customers expect.

Jonathan Neman: How do we make it easier to easier to make that job easier and more efficient in the back of house.

Jonathan Neman: And again, we will consistently look at both tools and products that will make it easier to provide the experience that customers expect.

Operator: Your next question comes from the line of Sharon Zackfia on behalf of William Blair. Your line is now open. Hi, good afternoon.

Jonathan Neman: Your next question comes from the line of Sharon Zackfia of William Blair. Your line is now open.

Operator: Hi, good afternoon. I have two questions on my allotment. In California, I don't think you took prices when the minimum wage went up, and I know you already pay a healthy wage in California, but did you see any kind of incremental labor pressure in California? Maybe you can give us an idea of where you expect labor inflation to be in the second quarter relative to what you saw in the first.

Sharon Zackfia: Hi, good afternoon.

Sharon Zackfia: I guess two questions my allotment.

Operator: California, I don't think you did take price when minimum wage went up and I know you already pay.

Operator: The wage in California, but did you see kind of incremental labor pressure in California, maybe give us an idea of where you expect labor inflation to be in the second quarter relative to what you saw in the first.

Operator: Okay.

Mitch Reback: In the first quarter, we saw very little; as you know, the California Wage Act took effect April 1, and it really hit in the second quarter. Our wages did go up by kind of mid-to-high single digits in California, and we offset that with a 5% price increase in California, which took place February 21. The more broader question is, do you not see a lot of labor pressure anywhere else for the rest of the year at this point in time?

Speaker Change: Thanks sure.

Operator: In the first quarter, we saw very little as you know the California wage Act took place April one it really hit in the second quarter.

Mitch Reback: Our wages did go up in kind of mid to high single digits in California, and we offset that with a 5% price increase in California, which took place February 21.

Mitch Reback: And the more broader question do not see a lot of labor pressure anywhere else for the rest of the year at this point in time.

Jonathan Neman: Yeah, if there's anything I could add, Sharon, as I mentioned on the call and in the prepared comments, we've actually seen a lot of momentum with our team. As we've focused more on the stability of our head coaches as well as internal promotion, we've made huge strides in getting fully staffed at all levels. And I think we're seeing really great quality talent come in, and I think how we train them and continue to grow them through the system will see a much bigger focus over time on continuing to drive that internal promotion rate.

Speaker Change: Yes, so just anything I could add Sharon as I mentioned on the call in the prepared comments, we've actually seen a lot of momentum with our team as we focus more on the stability of our head coaches as well as the internal promotion, we've made huge strides in getting fully staffed at all levels and I think we're seeing really really great quality talent.

Jonathan Neman: Come in and I think how we train them and continue to grow them through the system, you'll see a much bigger focus over time of continuing to drive that internal promotion rate that is our people flywheel and so much of what we can offer it's weaker and that's really part of what I call. The American dream of starting somewhere as a team member and within three years being a head coach <unk>.

Jonathan Neman: That is our people flywheel, and so much of what we can offer at Sweetgreen is really part of what I call the American dream of starting somewhere as a team member and within three years being a head coach, making over $100,000 a year. So it's a huge part of what we're trying to do is not only create something great for our customers but create great opportunities for our team members.

Jonathan Neman: Over $100000 a year. So it's a huge part about what we're trying to do is not only create something great for our customers, but create a great opportunities for our team members.

Jonathan Neman: And then on Infinite Kitchen, just considering the metrics there remain very healthy at the margin level. Ultimately, kind of where do you see the overall fleet as it relates to Infinite Kitchen? I mean, is this something where, eventually, all locations are retrofitted? And separately, if not, would you consider just adding kiosks to all locations over time just given the checklist you're getting? Sure, so

Speaker Change: Great and then on infinite kitchen, just considering the metrics there remained very healthy at the margin level.

Jonathan Neman: Ultimately kind of where do you see the overall fleet as it relates to independent kitchen, I mean is this something where eventually all locations are retrofitted.

Jonathan Neman: And separately if not would you consider just adding kiosks locations over time, just given the check lift youre getting.

Jonathan Neman: Sure. So, thank you for the question. So, we're very excited about the results we're seeing with Infinite Kitchen. Not only are we seeing great feedback from a customer perspective, but we're also delivering on what we expected from a unit economics perspective. So, as I mentioned, the two stores that we have the two pilot stores we have, which are kind of trending towards $2.6 million AUVs, ran a 28% margin in the quarter. So, about 10 points ahead of the rest of the fleet.

Speaker Change: Sure so thanks.

Speaker Change: Thank you for the question. So we're very excited about the results, we're seeing with infinite kitchen, not only are we seeing great feedback from a customer perspective, we're seeing we're delivering on what we expected from a unit economics perspective, so as I mentioned, the two stores that the two pilot stores, we have which are kind of trending towards $2 6 million Evs ran at 28 <unk>.

Jonathan Neman: Margin in the quarter. So about 10 points ahead of the rest of the fleet.

Jonathan Neman: Last quarter, we had we had shared that we expect about seven points of leverage on on an infinite kitchen stores. So we're seeing a little bit higher than that and that's that's very promising for us as we think about what the infinite kitchen could look like going forward. We do think it's going to be a huge part of our go forward strategy as we get manufacturing setup.

Jonathan Neman: And get more confident in this in both the what how we design those experiences and continue to drive down the cost of the machines to fit into more places youll see a much higher mix of our deployment in new stores, we talked about retrofitting three to four stores. This year, we're going to learn a ton from those from those experiments on as we as we learn about.

Jonathan Neman: How much downtime there is what the cost of the renovation is and what the uplift is we'll start to understand how much more of the fleet. We think we can retrofit we've talked in the past that there is definitely a huge chunk of very high volume stores that we think have an opportunity for a retrofit, but I think we have a little bit more to learn in terms of.

Jonathan Neman: We're standing does it go everywhere and at what time frame do they do we wait for the renovation cycle or do we pull it forward. So there's a lot to learn but I'd say, we're very bullish on the technology and the experience we expect it to be a huge part of future deployments and probably increasing the percentage of NR Roes that feature an infinite kitchen each.

Jonathan Neman: There's a lot to learn, but I'd say we're very bullish on the technology and the experience. We expect it to be a huge part of future deployments and probably increase the percentage of NROs that feature in Infinite Kitchen each year. As we learn more about the renovations, we'll start to go back and tackle that as well.

Jonathan Neman: Year and as we learn more about the renovations will start to go back in and tackle that as well.

Speaker Change: Okay. Thank you.

Operator: Your next question comes from the line of Jon Tower of Citigroup. Please go ahead.

Jonathan Neman: Your next question comes from the line of John <unk> of Citigroup. Please go ahead.

Operator: Thanks. Thanks for taking the question.

Jon Michael Tower: Thanks, Thanks for taking the question.

Jon Michael Tower: Hoping you could we've heard from others in the industry that the second quarter or first quarter itself was kind of choppy second quarter also kind of going in the wrong direction for a handful of concepts just kind of curious to get your perspective on what youre seeing with respect to consumer demand specifically on the traffic side.

Mitch Reback: Hoping you could, we've heard from others in the industry that the second quarter, first quarter itself was kind of choppy, and second quarter was also kind of going in the wrong direction for a handful of concepts. So I was kind of curious to get your perspective on what you're seeing with respect to consumer demand, specifically on the traffic side.

Speaker Change: Thank you John.

Mitch Reback: Thank you, Jon. Let me spend a minute and first talk a little bit about the first quarter and what we saw. And then I will end with a few remarks on the second quarter, although we're still under halfway through the second quarter. Like other people, the first quarter started off a little bit slow. And I would say January, we were very slightly negative, really attributable, in our view, to weather, something you know, many people have commented on. February, business was somewhere in the mid single digits. And by March, we were in very high single digits, and that averaged itself out to about 5%.

Speaker Change: Let me spend a minute and first talk a little bit about the first quarter and what we saw and then I will end with a few remarks on the second quarter, Although we are still.

Mitch Reback: Still under halfway through the second quarter.

Mitch Reback: Like other people the first quarter started off a little bit slow and I would say January.

Mitch Reback: Were very slightly negative really attributable in our view to weather.

Mitch Reback: Many people have commented on <unk>.

Mitch Reback: February new business was somewhere in the mid single digits and by March we were in very high single digits and that average itself out to about a 5%.

Mitch Reback: Also, in the first quarter for us, with our shifting calendar, we did pick up two additional holidays that we didn't have last year. As we start off in the second quarter, we're tracking a little bit ahead of the high end of our guidance halfway through the quarter. On the positive, that's also prior to our stake launch and prior to us really turning on the media. So we feel pretty good about where we're at in the second quarter at this point.

Mitch Reback: Also in the first quarter for us.

Mitch Reback: With our shift in calendar, we did pick up two additional holidays that we didn't have last year.

Mitch Reback: As we start off in the second quarter, we're tracking a little bit ahead of the high end of our guidance halfway through the quarter.

Mitch Reback: On the positive if that's also prior to our stake launch prior to us really turning non media. So we feel pretty good about where we're at at the second quarter at this point.

Mitch Reback: Great. Thank you for the color.

Speaker Change: Great. Thank you for the color I appreciate it.

Speaker Change: Maybe drill a little bit into the kitchen specifically.

Mitch Reback: The stores are seeing that <unk> got in Naperville as well as in.

Mitch Reback: Southern California, maybe you could speak about the traffic versus check perspective, I know you had mentioned on the last earnings call you were seeing a nice lift in check.

Jonathan Neman: I appreciate it. Something maybe drill a little bit into Infinite Kitchens and specifically, you know, the stores you're seeing that you've got in Naperville as well as in Southern California. Maybe you could speak about the traffic versus check perspective. I know you mentioned on the last earnings call that you were seeing a nice lift in checks. Just curious to know how traffic has trended as those stores have kind of matured a little bit more in those markets. You know, as awareness is built around the technology and what you're serving, has that led to increases in traffic at the level you were expecting?

Jonathan Neman: Just curious to know how traffic has trended as those stores have kind of matured a little bit more of those markets.

Jonathan Neman: Awareness is built around the technology and what Youre, serving as that led to increases in traffic at the level you were expecting.

Jonathan Neman: So both stores are, thank you, Jon. Both stores are under one year old. So we're not able, obviously. Actually, Naperville just hit its one year anniversary, I think it was yesterday.

Jonathan Neman: So both of those are Ah. Thank you John most stores are under one year old. So we're not able obviously I actually naperville just hit its one year anniversary I think it was yesterday.

Jonathan Neman: So we're just starting to understand what that looks like year over year. But overall, we've seen momentum in those stores. And so as awareness has continued to build, the stores are strengthening, not weakening. So, you know, we're pretty; we feel very good about those restaurants and the experience we're putting forth. And as I said before, we actually think, you know, a lot of people have asked about the Infinite Kitchen, how we feel about it, and what our confidence level is.

Speaker Change: We're just going to start we're going to start to understand what that looks like year over year, but overall, we've seen momentum in those stores and so as awareness has continued to build.

Jonathan Neman: The stores are strengthening not weakening so we're pretty we feel very good about those restaurants and the experience, we're putting forth and as I said before we actually think of.

Jonathan Neman: A lot of people have asked about the infinite kitchen, how we feel about it and what our confidence level is and what I've shared in the past and I'll reiterate is that we feel very good about the technology.

Jonathan Neman: And what I've shared in the past, and I'll reiterate, is that we feel very good about the technology and, you know, the scalability of the technology. It works, our teams love it, and it delivers. I think there is a lot of opportunity for us around how we continue to elevate that experience featuring the Infinite Kitchen. So how do we add, you know, more of that Sweetgreen magic within that experience and more hospitality components and those sorts of things?

Jonathan Neman: And what the scalability of the technology. It works our teams love it and it delivers I think there is a lot of opportunity for us around how we continue to elevate that experience featuring the infinite kitchen. So how do we add more of that sweet green magic within that experience and more hospitality components and those sorts of.

Jonathan Neman: You'll see us continue to iterate on store designs and experiences. Just something that we always do is just try to make a better experience. So overall, very pleased, continued momentum, and we'll continue to iterate to improve.

Jonathan Neman: Things Youll see us continue to iterate on store designs and experiences to just something that we always do is just try to make that make a better experience. So overall very pleased with continued momentum and we'll continue to iterate to improve.

Operator: Your next question comes from the line of Andrew Charles of TD Common. Please go ahead.

Jonathan Neman: Your next question comes from the line of Andrew Charles of TD Kauffman. Please go ahead.

Operator: Great, thank you. You know, I wanted to ask about stake, which in test markets you mentioned was included in one of five orders. Given the robust data you have from loyalty users, can you help us understand the incrementality of stake sales and repeat usage that you observed in tests?

Andrew Michael Charles: Great. Thank you.

Operator: I wanted to ask about state that in test markets. You mentioned that was included in one in five orders given the robust data you have from below to users can you help us understand the instrumentality of stake sales and repeat usage and the user test.

Jonathan Neman: Sure. Hi Andrew.

Speaker Change: Sure Hi, Andrew So we're very excited about steak at lunch two days ago. We ran a test in Boston that was very encouraging as we mentioned one in five business dinner orders were also I think one of the good things about steak and one of the intention was to broaden the consumer bring more customers in broadened the day part and also expand that.

Speaker Change: That customer base, you know a lot of a lot of the surveys consumer insights that we had is there is a lot of fast casual use customers that wont go somewhere unless there is a meat option and especially with the huge focus on protein, which we've been leaning on with our protein place its a big opportunity. So we're seeing a wonderful reception.

Speaker Change: We have seen a really really nice repeat rate as well, which is why why it gave us confidence in moving from a test to a launch. So it wasn't just trial, we saw people coming back and ordering it and and we did throughout the pilot period. The test period make some changes and we saw improvements as we started to iterate on the actual recipe.

Speaker Change: And builds so it's still very early only two days in media has not been turned on yet, but we're very encouraged by the early results and so what you'll see with steak is probably a few things one given the price you'll see some tailwind from a mix perspective, but we should also hopefully see some transaction growth as we bring in more new customers and <unk>.

Jonathan Neman: So we're very excited about Steak. It launched two days ago. We ran a test in Boston, and that was very encouraging.

Jonathan Neman: As you mentioned, one in five business dinner orders. We're also, I think, one of the good things about Steak, and one of the intentions was to broaden the consumer, bring more customers in, broaden the day part, and also expand that customer base. A lot of the surveys and consumer insights that we had are that there are a lot of fast, casual customers that won't go somewhere unless there is a meat option. And especially with the huge focus on protein, which we've been leaning on with our protein plates, it's a big opportunity. So we're seeing a wonderful reception. We have seen a really, really nice repeat rate as well, which is why it gave us confidence in moving from a test to a launch. So it wasn't just a trial.

Jonathan Neman: We drive that extra occasion, specifically around dinner.

Jonathan Neman: Yeah.

Speaker Change: Okay Super and then my follow up was just you talked about the incremental throughput opportunities through more productive staffing better staffing no doubt a product of broadband initial observations of the brand can you help us identify the ultimate opportunity the ultimate unlock on traffic that you think this can also provide once you are able to fully optimize this.

Speaker Change: And are you asking what's the ultimate unlock on traffic in general.

Jonathan Neman: Yes from the improved staff, taking the more efficient staffing that you recently were talking about.

Jonathan Neman: We saw people coming back and ordering it, and we did throughout the pilot period, the test period, make some changes, and we saw improvements as we started to iterate on the actual recipes and builds. So it's still very early, only two days in. The media has not even turned on yet, but we're very encouraged by the early results. And so what you'll see with Steak is probably a few things. One, given the price, you'll see some tailwinds from a mix perspective, but we should also hopefully see some transaction growth as we bring in more new customers and hopefully drive that extra occasion, specifically around dinner.

Jonathan Neman: Yes, I think I think it's a few things one there's the immediate pick up of of those additional transactions. So as you go faster you can pick up those additional transactions, but I think what you get over time as a change in perception around the brand. So you think about lunch or dinner and you think about your how much time you have in there.

Jonathan Neman: As brands that are in your consumer and your in your consideration set and then Theres one does not and as you as we start to pick up throughput you start to enter that consideration set for people that have more limited time, and we know that over time that drives transactions. So already we're seeing some really nice moves there in terms of both how we train our teams around throughput.

Jonathan Neman: Okay, super. My follow-up was just, you know, you talked about the incremental throughput opportunities through more productive staffing and better staffing. No doubt a product of Rozanne's initial observations of the brand. Can you help us identify the ultimate opportunity, the ultimate unlock on traffic that you think this can also provide once you're able to fully optimize this?

Jonathan Neman: How we deploy our late and how we deploy our labor and a huge why do we talk about our turnover at why do we think about our turnover and head coach stability and internal promote is those are leading indicators for our ability to drive throughput and hospitality. So I really just wanted to thank our head coaches, our wholesale team and our operators for the amazing job there.

Jonathan Neman: And I think we're really just getting started here.

Jonathan Neman: Are you asking what's the ultimate unlock on traffic in general?

Speaker Change: Your next question comes from the line of Ryan <unk> of Piper Sandler. Please go ahead.

Jonathan Neman: Yeah, from the improved staffing and the more efficient staffing that you recently were talking about.

Jonathan Neman: Yeah, I think I think it's a few things. One, there's the immediate pickup of those additional transactions. So as you go faster, you can pick up those additional transactions. But I think what you get over time is a change in perception around the brand. So you know, you think about lunch or dinner, and you think about how much time you have, and there are brands that are in your consumer in your consideration set.

Jonathan Neman: And then there's one that's not as you, as we start to pick up throughput, you start to enter that consideration set for people that have more limited time. And we know that over time, that drives transactions. So already, we're seeing some really nice moves there, in terms of both how we train our teams around throughput, how we deploy our late, and how we deploy our labor. And a huge reason why we talk about our turnover and why we think about our turnover and head coach stability and internal promotion is that those are leading indicators for our ability to drive throughput and hospitality. So I really just want to thank our head coaches, our whole field team, and our operators for the amazing job they're doing. And I think we're really just getting started here.

Operator: Your next question comes from the line of Brian Mullan on Piper Sandler. Please go ahead.

Speaker Change: Hey, Thank you just a follow up on that for the kitchen, Jonathan clarification on that 28% margin in Q1 is that a fair way to think about.

Operator: Hey, thank you. Just to follow up on Infinite Kitchen, Jonathan, clarification on that 28% margin in Q1. Is that a fair way to think about the margin on an annual basis at those 2.6 million volumes? What might it be? And then separately, you know, is it fair to think if an Infinite Kitchen location in an urban setting happened to see AUVs above the system average, you know, maybe something above 3 million, would that urban location potentially see restaurant-level margins that were higher than 28%? You know, just any thoughts on that idea would be great.

Operator: The margin on an on an annual basis at those $2 6 million volumes, what it might be and then separately is it fair to think if an incident kitchen location in an urban setting happened to <unk> above the system average, maybe something above 3 million would that urban location potentially see restaurant level margins that were higher than two.

Operator: 28%, just any thoughts on that idea would be great.

Speaker Change: Thank you Brian.

Jonathan Neman: Thank you, Brian, for the question. Yeah, first I'll answer the first part.

Jonathan Neman: For the question Yeah, Let me first answer the first part I would probably say I think the 28% margin that we saw in the first quarter for Huntington Beach in Naperville is probably a good margin.

Jonathan Neman: Yeah, I would probably say I think the 28% margin that we saw in the first quarter for Huntington Beach and Naperville is probably a good margin for an AUV suburban $2.6 million IK. There was absolutely nothing in the first quarter performance for those two stores that would lead us to think anything else, with the possible exception that Huntington Beach is still a very new store that was its first quarter. So maybe we'll get a little bit of upward momentum under Huntington Beach as we roll forward.

Jonathan Neman: The suburban to $6 million.

Jonathan Neman: There was absolutely nothing in the first quarter performance for those two stores that would lead us to think anything else.

Jonathan Neman: With the potential maybe exceptions at Huntington Beach is still a very new store that was this first quarter. So maybe a little bit of upward momentum under Huntington Beach as we roll forward. We believe your second question is largely correct.

Jonathan Neman: We believe your second question is largely correct, that as the IK gets deployed in higher AUV stores, particularly in busy urban stores, the margin improvement will be greater than we're seeing in the suburban stores. And we also believe that we will see a big uptick in throughput driving up the AUV. And of course, on that higher throughput, the flow through will be approximately 70% as the only kind of cost that will drag us the cost of goods with no additional labor.

Jonathan Neman: Okay gets deployed and higher <unk> stores, particularly in busy urban stores that the margin improvement will be greater than we're seeing in the suburban stores and we also believe that we will see a big uptick in throughput driving up the <unk> and of course on that higher throughput.

Jonathan Neman: The flow through will be approximately 70%.

Jonathan Neman: Kind of cost that will drag as cost of goods.

Jonathan Neman: Labor.

Jonathan Neman: That is part of the reason we're doing the retro, and hopefully, on the next call or the call for the third quarter, we'll be in a position to kind of give more accurate and complete numbers around that.

Jonathan Neman: That is part of the reason, we're doing the retro and hopefully in the next call or the call for the third quarter will be in a position to kind of give more more accurate and complete numbers around that.

Jonathan Neman: Okay, that's great. Thank you for that.

Speaker Change: Okay. That's great. Thank you for that and then just a question on development last quarter. You mentioned you were looking at potentially exploring a smaller format.

Speaker Change: As well could you just talk about that with some of the work you're doing how far along are you is that perhaps part of the plan for the next year or two or is that a bit further out any color.

Jonathan Neman: Sure, that kind of plays into my comments earlier about continuing to evolve the actual experience. And so we have a few designs and prototypes ready that we've iterated on, and you should expect to see those smaller format units begin testing early next year. So we're about a year away from those kinds of hits, we're starting to understand how they perform, and we think that will be one of the levers as we look to accelerate our pipeline.

Jonathan Neman: And then just a question on development. Last quarter, you mentioned you were looking at potentially exploring a smaller format unit as well. Could you talk about that? What's some of the work you're doing? How far along are you? Is that perhaps part of the plan for the next year or two? Or is that a bit further out? Any color? Sure.

Jonathan Neman: Sure.

Jonathan Neman: Does that kind of plays into my comments earlier around how we're thinking about continuing to evolve the actual experience and so we have a few designs and prototypes ready to go ready that that we've that we've reiterated on and you should expect to see those smaller format units begin testing early next year. So.

Jonathan Neman: We're about a year away from those kind of hitting.

Jonathan Neman: Starting to see starting to understand how they perform and we think that will be one of the levers as we think as we look to accelerate our pipeline I'd say beyond the smaller format. We do see other formats is a huge part of our of our playbook. So we do believe drive throughs are a really big opportunity something we are looking at and we have.

Jonathan Neman: I'd say beyond the smaller format, we do see other formats as a huge part of our playbook. So we do believe drive-throughs are a really big opportunity, something we are looking at, and we have some opportunities, especially with the IK. As you know, we've seen some great success with our current suite lane. We also have a pickup kitchen that does phenomenally well, which is a super small, just-to-pickup-only mobile order and pickup-only store.

Jonathan Neman: Some opportunities, especially powered with the Ik as you know we've seen vary with some great success with our current suite Lane. We also have a pickup kitchen that does phenomenally, well, which is a super small.

Jonathan Neman: Just to pick up only mobile order and pickup only store again, adding the ik into that unlocks a lot of Tam for us. So as we look forward for our pipeline, we actually see a lot of densification opportunities in markets that we already reduced already very well and as we're able to kind of fill in with some of the smaller formats.

Jonathan Neman: Again, adding the IK into that unlocks a lot of TAM for us. So as we look forward to our pipeline, we actually see a lot of densification opportunities in markets that we do already very well in, as we're able to kind of fill in with some of these smaller formats and different types of formats.

Jonathan Neman: Different types of formats.

Operator: Your next question comes from the line of Katherine Griffin from Bank of America. Please go ahead. Hi.

Jonathan Neman: Your next question comes from the line of Catherine Kristen from Bank of America. Please go ahead.

Operator: Hi, thank you. First, I just have a quick clarification and then a question. So just to clarify, because I think the previous revenue guidance had some assumptions baked into it in terms of the downtime associated with the retrofits. That's still the case. I think even though you haven't, it sounds like you haven't really quantified exactly what that downtime might be. It's still baked into the guidance.

Katherine Anne Griffin: Hi, Thank you firstly I just have a quick clarification and then a question. So just to clarify because I think the previous revenue guidance had had some assumption baked into it in terms of the downtime associated with the.

Operator: The retrofit.

Operator: Still the case I think even though you haven't.

Operator: It sounds like you haven't really quantified exactly what that downtime might be it's still baked into the guidance.

Mitch Reback: Yeah, that's correct, Katherine. Okay, great.

Speaker Change: Yes, that's correct Kathryn Okay, Great and then the question is just on protein plates as that.

Jonathan Neman: And then the question is just on protein plates as a, you know, a pretty meaningful traffic driver, it seems like. Can you help me just frame or even like quantify how much of the, you know, transaction, I don't know, growth that you've seen is from protein plates in the last couple of quarters? And then, I guess, how much of that do you think is a trial versus something that's more sustainable going forward? Sure, so I can take it.

Jonathan Neman: As a as a pretty meaningful chocolate driver. It seems like can you help me just frame or even like quantify how much of that.

Jonathan Neman: Transaction.

Speaker Change: I don't know growth that you've seen us from protein plates of the last cut.

Jonathan Neman: Up quarters, and then I guess, how much of that do you think is like trial versus something that's more sustainable going forward.

Jonathan Neman: Sure, so I can take that. We've been very pleased with Protein Plates. I think, again, it's created, it's made Sweetgreen something that people now want for dinner. It's expanded our customer base, and it is definitely over-indexing in new markets as well. So some of the performance we're seeing, as I mentioned earlier, around these newer markets, where we're seeing double-digit comps, much of that is coming from Protein Plates. And the dinner growth we're seeing and the weekend growth we're seeing is really, really promising.

Speaker Change: Sure. So I can take that we've been very pleased with protein place I think again, it's created it's created it's made sweet green something that people now want at dinner. It has expanded our customer base and it is definitely over indexing in new markets as well. So some of the performance we're seeing as I mentioned earlier around these newer market.

Jonathan Neman: It's where we're seeing double digit comps much of that is coming from protein place and the dinner growth. We're seeing in the weekend growth. We're seeing is really really promising so still again, it's less than six months and with protein place, but we see a lot of opportunity and as we've talked about before we see sweet Green is more than just the solid place and we're going to continue to build on.

Jonathan Neman: So still, again, it's less than six months in with Protein Plates, but we see a lot of opportunity. And as we talked about before, we see Sweetgreen as more than just a salad place, and we're going to continue to build on these warm, hearty, craveable, but still healthy options for our guests.

Jonathan Neman: On these these warm hardy craveable, but still healthy options for our guests.

Jonathan Neman: Yes.

Operator: Your next question comes from the line of Brian Harbour of Morgan Stanley. Please go ahead.

Jonathan Neman: Your next question comes from the line of Brian <unk> of Morgan Stanley. Please go ahead.

Operator: Yeah, thanks. Good afternoon. Mitch, could you just update us on pricing for the rest of the year? I think you had previously said about 4%. Is that still the right number looking forward, or is it going to be closer to 5%?

Brian James Harbour: Yes. Thanks, Good afternoon, Mitch could you just update us on.

Operator: Pricing.

Speaker Change: For the the.

Operator: The rest of the year I think you had previously said about 4% is it still the right number looking forward or is it going to be closer to five.

Mitch Reback: Thank you, Brian. It's going to be closer to 4. There's one point that's going to be rolling off, I think, in April, and at this point in time, we don't plan any more price moves for the rest of the year.

Mitch Reback: Thank you, Brian it's going to be closer to four.

Mitch Reback: There is one point, that's going to be rolling off I think in April and at this point in time, we don't plan any more price moves for the rest of the year.

Jonathan Neman: Okay, got it. And then just on the topic of throughput and operations, is there anything you could say about, any way you could quantify it in terms of like speed of service or in terms of sort of like digital order throughput, other things that might frame for us the improvement you've seen relative to last year?

Speaker Change: Okay got it.

Speaker Change: And then just on the topic of.

Jonathan Neman: Throughput in operations is there any.

Jonathan Neman: Thing you could say about any way you could quantify it in terms of like speed of service.

Jonathan Neman: Terms of sort of like digital order throughput other things that might frame for us.

Jonathan Neman: The improvement you've seen relative to last year.

Jonathan Neman: Yeah.

Jonathan Neman: So there are a few ways we think about throughput. We think about throughput on both our front lines, and we measure that in a 15-minute period. And what we talked about before is that with an additional five transactions in a store, that's about a point in comp. So there's a very big frontline opportunity.

Jonathan Neman: So there's a few ways, we think about throughput we think about throughput both on our frontline and then and we measure that in a 15 minute period and what we've talked about before is that with an additional five transactions in our store that that's about a point in comp. So there's no. If there is a very big frontline opportunity and then on the back lines, our digital make lines we have much.

Jonathan Neman: And then on the back lines, our digital production lines, we have much better data because the way it's managed is through what we call a throttle. And where we see the huge opportunity in that we understand what the line's theoretical throttle is, we understand what the line's max throttle is, and then we know where we're running. And if you look at the stores that are running at maximum capacity versus things running where the average is, there is a ton of room on those throttles, which we manage for 15 minutes. So the best stores can do up to 90 orders per 15 minutes, and then you have many stores more in the 40 to 50 range.

Jonathan Neman: Better data because we the way it's managed through what we call a throttle and where we see the huge opportunity in that as we see we understand what the lines theoretical throttle our we understand what the line Max throttle is and then we know where we're running and if you look at it.

Jonathan Neman: If you look at the stores that are running at Max versus things, writing you know where the averages there is a ton of room on those throttles, which we managed for 15 minutes. So the best stores can do up to 90 orders per 15 minutes and then you have many stores more in the 40 to 50 range. So there is a big opportunity as we get staffed and trained.

Jonathan Neman: So there is a big opportunity as we get staffed and trained and deployed correctly to continue to unlock the throttles on our digital production lines, which we think is a really big opportunity. And again, I'll take this opportunity to talk about how much of our focus right now is just on running great restaurants. It's about delivering a consistently hospitable experience to our guests, which we know brings them back, they tell their friends, it drives that word of mouth, and given the type of food that we serve and the feeling that it gives you, it really, it has this habitual nature to it.

Jonathan Neman: And deployed correctly to continue to unlock.

Jonathan Neman: Unlocked throttles on our digital make lines, which we think is a really big opportunity and again I'll take this opportunity to talk about so much of our focus right. Now is just on running great restaurants, it's about driving delivering a consistent <unk> experience to our guests, which we know brings them back they tell their friends that drives that word of mouth and given.

Jonathan Neman: The type of food that we serve and a feeling that it gives you. It really it has this habitual nature to it so when we when we when we do what we need to do things really work out well and we're very very much focused on this and as we've.

Jonathan Neman: So when we do what we need to do, things really work out well, and we're very, very much focused on this. And as we've invested in our operations team, very, very excited to have Rossanne here with us under her leadership, as well as Anne, our VP of operations, we feel very good about the work they're doing to continue to drive great consistent experiences.

Jonathan Neman: We've invested in our operations team very very excited to have Roxanne here with us under her leadership as well as an our VP of operations, we feel very good about the work they're doing to continue to drive great consistent experiences.

Jonathan Neman: Yeah.

Jonathan Neman: Thanks.

Operator: There are no further questions at this time. I will now turn the call back over to Rebecca Nounou for closing remarks. That concludes our Q&A session.

Speaker Change: There are no further questions at this time I will now.

Rebecca Nounou: I'll turn the call back over to Rebecca for.

Rebecca Nounou: For closing remarks.

Rebecca Nounou: That concludes our Q&A session.

Operator: Yeah.

Operator: Yeah.

Rebecca Nounou: Yeah, I'll just take this opportunity again to thank our team. Thank you for all that you do every day in delivering our mission. And we'll see you next quarter. Thanks, everyone.

Rebecca Nounou: Yes, I'll just take this opportunity again to thank our team. Thank you for all that you do every day in delivering our mission and we will see you next quarter. Thanks, everyone.

Operator: This concludes today's conference call; you may now disconnect.

Speaker Change: This concludes today's conference call you may now disconnect.

Operator: Okay.

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