Sweetgreen, Inc. — Q1 2023 Form 10-Q
Business context and reporting period. The filing covers the 13 weeks ended March 26, 2023, compared with the 13 weeks ended March 27, 2022. Sweetgreen operated 195 restaurants across 16 states and Washington, D.C., and opened 9 net new restaurants during the quarter. It reports one operating and reportable segment.
Financial results and key metrics
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $125.1 million | $102.6 million | +22% |
| Net loss | $33.7 million | $49.7 million | Loss narrowed by $16.0 million |
| Net loss per share, diluted | $0.30 | $0.45 | Loss per share narrowed |
| Loss from operations | $35.3 million | $50.0 million | Loss narrowed by $14.7 million |
| Restaurant-Level Profit (non-GAAP) | $16.9 million; 14% margin | $13.4 million; 13% margin | Improved |
| Adjusted EBITDA (non-GAAP) | $(6.7) million; (5)% margin | $(17.0) million; (17)% margin | Loss narrowed |
| Net cash used in operating activities | $3.1 million | $17.3 million | Cash use decreased |
Revenue growth reflected $18.7 million from 45 net restaurant openings during or after the prior-year period and a $5.6 million increase in comparable-restaurant revenue. Same-store sales rose 5%, comprising a 3% contribution from menu price increases and 2% from transactions; AUV was $2,932, up 5%. The company reported total digital revenue at 61% of revenue, down from 66%, and owned digital revenue at 39%, down from 43%.
Restaurant operating costs were $108.1 million, up 21%; food, beverage and packaging costs rose to 28% of revenue from 26%. Labor costs were 31% of revenue versus 33%, while occupancy and other restaurant operating costs were each 10% and 17% of revenue, respectively, in both periods. General and administrative expense fell 30% to $34.9 million, partly reflecting lower stock-based compensation and employee retention tax credits.
Cash, debt and liquidity
Cash and cash equivalents were $296.8 million at March 26, 2023, down from $331.6 million at December 25, 2022. Net cash and restricted cash decreased $34.8 million during the quarter. Investing activities used $32.4 million, including $30.9 million of property and equipment purchases. The company had no borrowings under its revolving credit facility; $44.1 million remained available after a $0.95 million letter of credit. The facility has a $45 million limit and matures December 13, 2024. Management said available cash and revolver access should fund operating leases, capital expenditures and working capital for at least 12 months.
Operating lease liabilities totaled $303.4 million, including $28.8 million current; undiscounted future minimum lease payments were $399.7 million. The company also disclosed $22.5 million of additional lease commitments for leases not yet in possession. No other outstanding debt balance was reported.
Changes, outlook and risks
Despite higher revenue, the company remained loss-making. Improvement in GAAP and non-GAAP losses reflected lower general and administrative expense, including reduced stock-based compensation, employee retention tax credits, and higher interest income on cash balances. Growth investments also drove higher capital spending, depreciation and pre-opening costs.
Management reported preliminary positive revenue momentum early in Q2, and said it was encouraged by its loyalty-program launch and broader menu offerings; it cautioned that these early results may not continue or predict future performance. No numerical full-year guidance was provided. Management noted that AUV had begun to improve as the company moved into spring.
Key risks include inflation in wages and food costs, softening consumer demand, slower-than-expected return to offices and remote or hybrid work patterns, and uncertainty about consumers’ willingness to pay premium prices. A packaging-supply interruption during Q1 required alternative, higher-cost materials and could recur. Delivery channels may pressure margins through third-party fees. The company also cited seasonality, supply-chain execution, and the risk that future cost increases cannot be offset by pricing without weakening demand.
Unusual items included $6.9 million of employee retention tax credits recorded as a receivable and operating-expense benefit ($1.8 million in labor and $5.1 million in general and administrative expense); $0.6 million of restructuring charges related to a vacated support center; and a $1.1 million expense from remeasuring Spyce acquisition contingent consideration, whose liability was $22.3 million. The company said ordinary-course legal matters were not expected to have a material effect, while noting adverse outcomes could affect results. It reported effective disclosure controls and no material changes to internal control over financial reporting.
Important facts for investors to verify
- Whether the early-Q2 momentum, loyalty program and menu changes translate into sustained traffic and same-store sales growth.
- Whether the $6.9 million employee retention tax credit receivable is collected as expected, and how results trend without that benefit.
- Whether restaurant-level margins can withstand food, packaging and wage inflation, delivery fees, and potential renewed supply disruptions.
- How planned restaurant openings and capital spending affect cash balances, operating cash flow and the company’s stated liquidity runway.
- The effect of substantial lease commitments and the Spyce contingent consideration liability on future cash needs and potential dilution.