Sweetgreen, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter filing. FY2023 had 53 weeks; FY2022 had 52 weeks, so annual comparisons include an extra week in FY2023.
Business context
Sweetgreen operates company-owned fast-casual restaurants focused on salads, bowls and other fresh food. At year-end it operated 221 restaurants across 18 states and Washington, D.C., with 35 net new restaurant openings during FY2023. Its five sales channels include in-store, pickup, native delivery, marketplace, and Outpost and catering.
Financial and operating performance
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $584.0 million | $470.1 million |
| Net loss | $113.4 million | $190.4 million |
| Loss from operations | $122.3 million | $193.3 million |
| Adjusted EBITDA (non-GAAP) | $(2.8) million | $(49.9) million |
| Restaurant-Level Profit (non-GAAP) | $101.9 million; 17% margin | $69.3 million; 15% margin |
| Net cash from operating activities | $26.5 million | $(43.2) million |
| Capital expenditures: property and equipment purchases | $89.7 million | $96.9 million |
Revenue increased 24%. The company attributed growth mainly to revenue from restaurants opened in FY2022 and FY2023, same-store sales growth, and the additional fiscal week. Adjusted same-store sales increased 4%, comprising a 4% benefit from menu price increases while traffic/product mix was flat. Adjusted AUV was $2.877 million, down 1% from $2.905 million.
Food, beverage and packaging costs were 28% of revenue in both years. Labor costs improved to 29% of revenue from 31%; occupancy costs to 9% from 10%; and other restaurant operating costs to 16% from 17%. General and administrative expense fell to $146.8 million from $187.4 million, or 25% of revenue versus 40%, primarily reflecting lower stock-based compensation and other cost reductions.
Owned digital channels accounted for 36% of revenue, down from 41%; total digital channels, including third-party marketplaces, represented 59%, down from 62%. Ending cash and cash equivalents were $257.2 million, versus $331.6 million a year earlier. Cash and restricted cash decreased by $74.4 million during the year.
Liquidity, debt and material changes
Sweetgreen reported no borrowings under its revolving credit facility. At December 31, 2023, it had $43.1 million of available revolver capacity after letters of credit. The company reported compliance with its credit-facility liquidity covenant and said cash and available revolver capacity should fund operating lease obligations, capital expenditures and working capital for at least 12 months.
Operating lease liabilities totaled $302.9 million; disclosed total operating lease commitments were $402.3 million, including commitments for leases not yet commenced and reasonably certain renewal periods. FY2023 operating cash flow improved by $69.6 million year over year, reflecting lower losses excluding non-cash items, working-capital movements and an Employee Retention Credit receipt. Investing cash outflow was $95.7 million.
Outlook, commentary, risks and unusual items
No numerical FY2024 revenue, earnings or margin guidance is provided in the filing text. Management plans to integrate Infinite Kitchen automation into an increased number of new restaurants in FY2024 and expects to deploy additional units in new and existing locations. Management cited continued uncertainty in customer traffic, inflation, wage and food costs, and return-to-office patterns.
- Cost and labor pressures: California legislation requires covered restaurant chains, including Sweetgreen, to pay a $20 hourly minimum wage beginning April 2024. The company expects menu-price increases to help offset the cost, but customer response is uncertain.
- Growth and channel risks: New restaurant economics, site availability, execution of expansion, and reliance on third-party delivery services may affect profitability. Delivery and marketplace channels generally carry lower margins.
- Concentration and demand: Approximately 28% of FY2023 revenue came from the New York City metropolitan area. Hybrid work, weaker discretionary spending, weather and seasonality may affect traffic.
- Automation: Infinite Kitchen was operating in two restaurants at year-end; reliability, deployment costs and customer acceptance remain risks.
- Unusual items: FY2023 included $7.4 million of restructuring charges, principally related to the vacated former support center; $49.5 million of stock-based compensation; and $7.0 million of Employee Retention Credit benefits recognized in labor and general and administrative expenses. The company also paid $10.4 million related to Spyce acquisition consideration and reported a $3.5 million non-cash fair-value expense for contingent consideration.
- Legal and regulatory matters: The company is subject to employment, accessibility and other claims and investigations, including an NYC fair-workweek investigation and ADA-related litigation. Management does not believe the ordinary-course matters will materially affect its financial position, but outcomes are uncertain.
Important facts for investors to verify
- Assess underlying sales momentum: same-store sales growth was 4%, primarily price-driven, with flat traffic/product mix; account for the extra FY2023 week.
- Track whether operating cash generation continues and how expansion capital spending compares with cash from operations.
- Evaluate the sustainability of improved restaurant margins and reduced corporate costs, including the effect of stock-based compensation and non-GAAP adjustments.
- Monitor the impact of California’s wage increase, menu pricing and customer demand, plus food, packaging and delivery costs.
- Review Infinite Kitchen deployment, restaurant-level performance and required investment, and the company’s substantial lease commitments and available liquidity.