Good afternoon. My name is Emma and I will be your conference operator today. I would like to welcome everyone to the Sweetgreen First Quarter 2023 Earnings Conference Call. All lines have been muted to avoid background noise. Rebecca Nounou, Head of Investor Relations, you may start your conference.

Thank you, and good afternoon, everyone. Here with me today are Jonathan Neman, Co-Founder and CEO; and Mitch Reback, Chief Financial Officer. Before we begin, we have a couple of reminders. Our earnings release is available on our website at investor.sweetgreen.com. During this call, we will be making comments of a forward-looking nature. Actual results may differ materially from those expressed or implied as a result of various risks and uncertainties. For more information about some of these risks, please review the company’s SEC filings, including the section titled Risk Factors in our latest Annual Report on Form 10-K filing and subsequently filed quarterly report on Form 10-Q. These forward-looking statements are based on information as of today, and we assume no obligation to publicly update or revise our forward-looking statements. Additionally, we will be discussing certain non-GAAP financial measures, which are in addition to and not a substitute for measures of financial performance prepared in accordance with GAAP. A reconciliation of these items to the nearest U.S. GAAP measure can be found in this afternoon’s press release available on our IR website. And with that, it’s my pleasure to turn the call over to Jonathan to kick things off.

Thank you, Rebecca. And good afternoon, everyone. This is a really exciting time for Sweetgreen, and I'm energized by all the strategic updates we will share with you today. We believe times like these create opportunities for companies with great brands, large addressable markets, and loyal customers. And we expect to look back on this period as a moment that catalyzed our next phase of durable growth. We recognize that great businesses have to be companies balancing growth and profitability. And I'm confident that the actions we have taken over the last few quarters put it squarely on the path to growing shareholder value in the years ahead. Becoming a large profitable company starts with providing exceptional guest experiences. Our team has done a tremendous job thinking through how we can better serve all our guests. From our new loyalty programs to the new menu items like the Chicken in Chipotle Pepper Bowl to driving top-quality execution in our restaurants. I am pleased with our performance. I want to extend my gratitude to every Sweetgreen team member for their dedication to our mission of building healthier communities by connecting people to real food. My co-founders and I collectively remain the largest shareholders of the company and we treat every dollar as though it were our own. As we transition to operating in an environment defined by uncertainty and an increased cost of capital, we are incredibly focused on driving high returns within our existing fleet and across new projects we undertake. The head start we have in building the category allows us to be disciplined during this period while remaining nimble enough to take advantage of the opportunities that will undoubtedly arise. We see our approach paying off as we reported first quarter sales of $125.1 million, representing 22% year-over-year growth and same-store sales growth of 5%. Our same-store sales growth was driven by 2% growth in traffic and 3% from price taken in January. Total digital sales represented 61% of our Q1 revenue, with approximately two-thirds of those sales coming via our own digital channels. AUVs were $2.9 billion, and restaurant-level margin in the quarter was 14%. Our adjusted EBITDA loss for the quarter was $6.7 million, down from a 2022 first quarter adjusted EBITDA loss of $17 million. Excluding the impact of the employee retention tax credit related to the Cares Act, restaurant level margin would have been 12%, and adjusted EBITDA loss would have been $13.6 million at the top end of our Q1 guidance range. Our support center spend continues to track at $98 million for 2023. I'm pleased that during the first quarter sales grew 22% year-over-year while we operated the support center 8% lower than Q1, 2022. We remain incredibly focused on driving substantial operating leverage out of our support center in the coming years. In 2019, our support center costs were 30% of net revenue. Today, we expect that our support center costs, which now includes public company and spice-related costs, will be in the 16% to 17% range of net revenue. We will grow the support center only to the extent that further investments drive tangible returns on capital. We are committed to continuously re-underwriting how we steward and allocate capital to deliver returns and shareholder value creation. Make no mistake, continuing to drive operating leverage at the support center is a top priority for our management team. As we have discussed in the past, we operate with four strategic priorities, which are the basis for driving strong top-line growth, customer acquisition, and loyalty and profitability. This is our flywheel. As a reminder, our strategic priorities are: one, expand and evolve our footprint in new and existing markets to connect more communities to real food; two, build our brand and digital experience as the industry leader, allowing us to add new customer channels, drive frequency, and increase restaurant volume and margins; three, reinforce our commitment to credibility and inspire consumers to live healthier lives through reimagining fast food; and four, run great restaurants with a people-first culture focused on developing talent for our future growth. Now, let me provide an update on each of these priorities. In Q1, we opened a total of 12 new restaurants, ending the quarter with 195 restaurants. Since the quarter ended, we've opened an additional five restaurants, including our first in Cranston, Rhode Island. We remain on pace to open between 30 and 35 net new restaurants this year with plans to enter three additional new markets: Seattle, San Antonio, and Milwaukee. While early, we are pleased with the class of 2023 openings. As we discussed on our last call, our unit strategy is focused on disciplined, capital-efficient growth. We want to make sure that we're choosing great sites with the right leaders and executing our proven playbook in a thoughtful way that protects our brand. As we shared on our last call this year, we will be introducing two restaurants powered by our automated production line we call the Sweetgreen Infinite Kitchen. We're excited to share that next week on May 10, we will be opening our first Infinite Kitchen in Naperville, Illinois. Later this year, we will open a second Infinite Kitchen, retrofitting an existing restaurant so that we can learn how best to integrate the Infinite Kitchen into an existing site. From these pilots, we hope to learn how we can create a more consistent customer experience, faster throughput, and make our team members’ jobs easier and more dynamic. We believe this new concept powered by automation unlocks efficiency that will enable us to grow more quickly and have higher profit margins. While we're still testing and learning, we expect the Infinite Kitchen will be increasingly integrated into our pipeline. We look forward to sharing more of our learnings with you in future calls. We continue to build our brand and digital experience. Last week we launched our loyalty program Sweetpass nationwide, which we believe over time should drive significantly higher frequency in our customer base. Members of Sweetpass receive curated rewards and challenges, menu exclusive special birthday gifts, and more. With a Sweetpass Plus membership, members pay a $10 per month subscription to access a daily $3 offer and other benefits like free delivery, limited edition shops, and more. We had a very smooth launch with great buzz. We believe the program will drive margin improvements not only from the underlying membership fees, which come at limited costs but also through incrementality across our customer base. Through our seasonal offerings, digital exclusives, chef collaborations, and significant core menu, we continue to reinforce our commitment to our customer value proposition of making healthy delicious food craveable and convenient. In March we launched the Chicken Chipotle Burrito Bowl. This craveable, approachable, and hearty bowl is our take on the beloved Burrito bowl made the Sweetgreen way featuring a roasted Chipotle salsa, lime, cilantro, black beans, blackened chicken, and a double rice base. Our customers love it. The bowl is outperforming our targets as well as exceeding our goals for new customer acquisition. As part of the launch, we offered a promo for National Burrito Day to celebrate the new offering, exposing the brand to both new and existing customers. Beyond innovating on new limited-time menu items, we're also continuing to evolve our signature menu with new flavors that are highly requested by our customers. We brought back hummus in both new signature salads, the hummus crunchy salad, and for the first time, as a side of hummus and focaccia. We continue to broaden our beverage offering and recently introduced several healthy soda options as well as chocolate treats. While still early, we've seen attachment dollars grow nearly 25% in the first three weeks of launch. We believe the margin opportunity with attachments presents another significant opportunity for Sweetgreen in the coming years; an easy way to satisfy customer requests and drive sales efficiently through our footprints. Part of what makes Sweetgreen special are the partnerships we believe we can uniquely create given the strength of our brand. For example, in mid-April, we launched Boia De bowl, a collaboration with Michelin-starred Miami restaurant Boia De. The bowl is a bright and briny Italian-inspired creation with thoughtfully sourced ingredients and craveable stracciatella cheese on top. It's available to order from all seven South Florida locations through June 12. We are incredibly happy with customer reception to our innovation and customers should expect more from us in the coming quarters. Our robust menu roadmap includes continuing to test into additional heartier and more craveable grains and proteins, more collaborations with influential chefs, and expanding savory and sweet attachments, including expanding our dessert offering. Running great restaurants is the foundational element to making our business thrive. We continue to see executional improvements in our business as a result of our regional general manager model we implemented at the beginning of the year. Our metrics are showing an improvement in throughput, notably during peak period times. During the first quarter, we increased our digital throttle levels by 20% across the fleet, and we continue to see improved Front of House throughput across trade areas. Our restaurants are fully staffed and we continue to focus on hiring and retaining those who work full time. Our data shows those who are scheduled to work full time call out less and have higher tenure. In the first quarter, we saw lower turnover attributable to these scheduling practices. By the end of the year, we will launch tipping across the fleet, which we believe will improve team member turnover and, in turn, create a better overall customer experience. We also recently adjusted head coach schedules to give them more time on the floor to engage with our guests and team members, ensuring that we are delivering on our customer promise of fresh, fast, and friendly service. This goes back to our intimacy at scale playbook and specifically one of our core values of adding the sweet touch. I'm excited for the continued impact these initiatives will have on our ability to drive better business results and create a win-win-win for the customer, the company, and for you, our shareholders. Before I conclude, I want to take a moment and extend my gratitude to our Chief Marketing Officer Daniel Schlossman, who after five years at Sweetgreen will be leaving the company. Daniel played key roles in the launch of new channels, and most recently crafting our loyalty program. Nathaniel Ru, my co-founder and Chief Brand Officer, will be absorbing Daniel's duties. Sweetgreen is playing to win. Our customers remain core to everything we do as we focus on disciplined capital-efficient growth and our path to profitability. We have a powerful brand with a massive market opportunity, and I'm confident the steps we are taking will ensure our ability to sustainably further our mission of connecting people to real food. And now I'll turn it over to Mitch to walk through the quarter's financials.

Thank you, Jonathan. And good afternoon, everyone. We are pleased with our financial results for the first quarter with revenue finishing within our expected range. Total revenue for the first quarter was $125.1 million, up from $102.6 million in the first quarter of 2022, growing 22% year-over-year. Same-store sales grew 5% reflecting a 3% price increase taken subsequent to March 2022 and a 2% increase in transactions. Our average unit volume was $2.9 million, up from $2.8 million in Q1, 2022, nearing our pre-COVID AUVs. We opened 12 new restaurants this quarter. As shared on our last earnings call, we closed three restaurants in the first quarter: one in Los Angeles, one in Boston, and one in New York. All three of these restaurants had neighboring restaurants that had better customer and team member experience. Additionally, we will be able to drive incremental profitability by moving volume from one store to another. We ended the quarter with nine net new restaurants and a total of 195 restaurants. Restaurant-level margin in the first quarter was 14%. This includes a $1.8 million benefit related to the employee retention tax credits issued as part of the Cares Act. Excluding this credit, our margin was 12%, which is at the top end of our guidance. This improvement was primarily due to sales leverage. For a reconciliation of restaurant-level margin to comparable GAAP figures please refer to the earnings release. Food, beverage, and packaging costs are 28% of revenue for the quarter, which is 200 basis points higher than 2022. As mentioned on our last earnings call, starting in January, we experienced a packaging disruption which resulted in elevated packaging costs throughout the quarter. Labor and related costs were 31% of revenue for the first quarter, down 200 basis points from the comparable period in 2022. We recognized $1.8 million benefit related to the employee retention tax credits as part of the Cares Act. Our restaurants are fully staffed, and we are pleased with the quality of talent we are able to attract. Additionally, we've seen an easing of wage pressures. Occupancy and related expenses were 10% of revenue, consistent with the first quarter of 2022. G&A expense for the quarter was $34.9 million compared to $50.2 million in Q1, 2022. The $15.3 million decrease is primarily attributable to a $7.9 million decrease in stock-based compensation expense, a $5.1 million benefit related to the employee retention tax credit, and a decrease in management salaries and benefits. During the first quarter, our G&A expense excluding stock-based compensation and retention credit was 8% lower than 2022. Our net loss for the quarter was $33.7 million compared to a loss of $49.7 million in the prior year period. The decrease in net loss is primarily due to the decreases in G&A as previously discussed, as well as a $2.9 million increase in interest income and an increase in our restaurant-level profit. These decreases in expense were partially offset by an increase in depreciation and amortization associated with additional restaurants and an increase in pre-opening costs due to the timing of new restaurant openings. Adjusted EBITDA, which excludes stock-based compensation and certain other adjustments, was a loss of $6.7 million for the first quarter of 2023 as compared to a loss of $17 million in the prior year period. This improvement was primarily due to an increase in restaurant-level profit and a decrease in general and administrative expenses. Excluding the benefit of the employee retention tax credit, adjusted EBITDA was a quarterly loss of $13.6 million, an improvement of more than $3 million compared to the year-over-year quarterly loss. We ended the first quarter with a cash balance of just under $300 million. We continue to have a strong capital position that allows us to continue to expand our mission and provides us with flexibility. We're fiercely committed to disciplined, capital-efficient growth and protecting our strong balance sheet. I am pleased with the progress we are making on our path to profitability as we delivered higher than expected restaurant-level margins and lower support center costs. Our adjusted EBITDA losses will narrow significantly in 2023 as we become profitable on an adjusted EBITDA basis in 2024. Now turning to our outlook. For the fiscal year 2023, we reiterate our full year guidance with the exception of adjusted EBITDA loss, which now includes the $6.9 million benefit from the employee retention credits, 30 to 35 net new restaurant openings, revenue ranging from $575 million to $595 million, same-store sales between 2% and 6%, restaurant level margin of 15% to 17%, and adjusted EBITDA loss of between $13 million to $3 million. Our loyal brand following, combined with a localized supply chain designed for freshness and taste, propelled by a highly passionate team, positions us to capture a massive market opportunity, making for a valuable and scalable model. The steps we are taking will allow us to further extend our leadership and durable competitive advantage as we build the category. With that, I'll turn the call back to the operator to start Q&A.

Thank you. Your first question comes from the line of John Ivankoe with JPMorgan. Your line is open.

Hi, thank you. I was hoping we could spend a few more minutes talking about what you define as urban stores, just kind of signs of recovery, I suppose, or lack thereof, and how you might be adjusting your business model to what at this point in May of '23 might be defined as the new normal. And maybe elaborating on that to some extent, can you talk about how the competitive market '23 over 90 may be evolving, whether that is in those urban areas either better or worse or just different in some ways, greater count, lesser count, whatever you can say about the competitive landscape? And also talk about who you're running into as you go more into the suburban locations, that's the type of competitive set that you expected to compete against. Thank you.

Hi, John, thanks for the question. We're really starting to see the urban stores, and particularly the central business district stores, come back and come back fairly strongly on a four-day-a-week basis. I could say Mondays today are starting to level off at the same volume we see Tuesday through Thursday. And in terms of the kind of a comp growth rate really came out in the first quarter, it's just in the double-digit range at this point in time. So we're actually pretty pleased with what we've been seeing in the urban stores. In terms of what we're doing, we talked a little bit earlier on the call around broadening our menu and our loyalty program, which is really designed to drive frequency and boost any large number of catering channels, and we see these as ways we capture the volume that we may have missed out on on Fridays and weekends compared to pre-COVID. All things considered, we're actually pretty pleased with what we're seeing right now. There has been a lessening of competition, and we see that coming mainly from kind of independents, particularly in markets like New York.

Your next question comes from the line of Chris Carril with RBC Capital Markets. Your line is open.

Hi, good afternoon, Jonathan. You highlighted improvement in turnover and throughput in your prepared remarks. So to what extent do you think improvements in these areas helped to flip traffic back to positive in the 1Q? And how much of a tailwind do you see just ongoing improvement in labor efficiency and throughput providing going forward here? Thanks.

Yes. Hey, Chris, thanks for the question. So throughput has been a huge focus for us over the past six months. I mean, it's always something very important for us as speed of service is just important to our guests. As our staffing and labor environments have gotten better, we really focused on both increasing our throttles on our digital make lines, and we shared the stat. We were able to cross the fleet to increase throttles by 20%, which means we're serving the ability to serve 20% more people on our digital make lines. And that was a contributor to our urban growth. As Mitch mentioned, urban, and specifically, our central business districts were strong, and the throttle expansion was part of that. Secondly, we are focused on the front lines. Front lines have been a huge growth driver for us, as you'd expect with the world opening up. We're seeing much more traffic in our dining rooms, which is very encouraging for us as those customers that start in our dining rooms typically move into our digital ecosystem and become very valuable customers for us. So huge growth on the front lines and a big focus on increasing our throughputs on the front lines as well. I think there's more to do there. We've played with different line formats that we've been testing, some which are in different stores, which are seeing faster throughput. We shared some details on our optimized kitchen format before. And so as we open new stores with this format, we are seeing even faster throughputs and better productivity. So expected to continue to push here, both on the digital lines and our front lines to continue to drive speed of service.

Your next question comes from the line of Sharon Zackfia with William Blair. Your line is open.

Hi, good afternoon. I wanted to touch base on pricing. I think you may have taken a price increase earlier this quarter. I'm not sure if you mentioned that. Can you talk about the drivers of the price increase, kind of what you're seeing in ongoing commodity inflation? And how the consumer has reacted to that price increase?

Thank you, Sharon. We took approximately a 3% price increase at the beginning of the year. And at the beginning of the second quarter, we took just around 1%, which was very targeted in a handful of very select stores. What we really have found is not a lot of softness from the customer and resistance from the price increases we've taken. And we really don't have a strong price action plan for the remainder of the year.

Sharon, just if I could add anything to that, we're actually kind of encouraged on our relative price value compared to the competition. The industry has taken so much price over the past few years. And this quarter, we took three points. We know what our competitors did, and so we feel pretty good about our relative value and think that's going to be a big opportunity for us as we continue to grow.

Your next question comes from the line of Andrew Charles with TD Cowen. Your line is open.

Great. Thank you, Mitch. You saw same-store sales of 5%, which was near the high end of guidance while reported revenue came in near the low end of Q1 guidance. And so as we think about that dichotomy, can you speak to what you're seeing with new store sales volumes?

Yes, thank you, Andrew. Let me say that we're very happy with the class of 2023, and we're getting off to a good start, and I'm very encouraged by them. The class of 2022, which we spoke about in previous calls, we've seen some acceleration in certain markets as they've gone back to our intimacy and scale playbook. Other stores have taken a little bit longer term. And I think that's a little bit where you're seeing kind of this small change in sales volume.

Your next question comes from the line of Brian Harbour with Morgan Stanley. Your line is open.

Hey, great. This is Matt on for Brian Harbour. You make notable recent efforts to broaden the menu beyond the salads, more hearty options. Can you talk about the guest's response to this? How's this changing? Who's coming into the brand? And maybe any day part impact? Thanks.

Yes. So we've talked about this for a while, really are focused on meeting customers where they are with a broader menu, driving different occasions, and really bringing a broader customer base into Sweetgreen. So really this idea of craveability in a Sweetgreen way. As you know, we launched our Chicken Chipotle Pepper Bowl this quarter. And it was received really well. It's been one of our top five items, one of our top five launches, and has created a lot of brand buzz, and is acquiring a lot of customers. It's still very early, but we have a lot of new catalysts from a menu perspective en route. So expect a few more launches throughout this year, really pushing into that hot and hearty sort of food, making Sweetgreen more desirable across different day parts and for different consumers. So overall, very encouraged with the menu work and expect a lot more to come.

Your next question comes from the line of Jon Tower with Citi. Your line is open.

Hey, good afternoon. This is Karen on for Jon. I know it's early days, but can you speak to your observations in the loyalty program? Your relaunch, maybe relative to what you expected? And have you kind of explicitly built a contribution from that into how you're thinking about the same-store sales guidance for the year? Thanks.

Yes. So I'll start off. Overall, really encouraged. It's only been nine days since it launched last Monday, but overall, it was in pilot for a little bit. So far, it's exceeding our expectations in all of our key metrics. So we feel very excited about it. Customers are loving both the free version, as well as the paid subscription. We will come back with more details on how it's performing. But overall, I think in this environment, not having a loyalty program was something that I think consumers were asking for. And so we're really excited to have it out there and have it be uniquely built in a Sweetgreen way. So one thing I would say is the way we built it gives us a lot of personalization levers around this, around Sweetpass. So we can be very efficient in our marketing and promotional spend, and how we actually increase the frequency of guests without a one-size-fits-all approach.

Just commenting on the second part of your question, given how early we are in the program, we have not explicitly built any upside into our same-store sales guidance.

Your next question comes from the line of Katherine Griffin with Bank of America. Your line is open.

Hi, thank you. So I wanted to ask actually just about the revised guidance. So I think given the fact that excluding the credit, Q1 adjusted EBITDA came in at the top of the range. You have a number of top line drivers in place, it seems like USDA fees are low what's in your control you're able to do that, you know very well, whether it's on the G&A side or just cost control generally. And so I'm sort of I'm wondering what's embedded at this point in the low end of the revised guidance range, kind of what are some offsets, I guess, to what otherwise seems to be like a very good operating environment.

Katherine, thank you for the question. We feel really positive about the things we control. We're very happy with the loyalty program, our class of '23, the menu items we're putting in place. Some of our channel development was catering. What we're really a little bit concerned about is the external environment that we don't control. And I think if you ask what's at the bottom end of the guidance, it's really just looking at the outside world and wondering what it's going to deliver to us as we go through the next nine months. But we feel very confident about the programs and initiatives that we have in place.

This concludes today's conference call. You may now disconnect.