Sweetgreen, Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 25, 2022 (52 weeks). This is an annual filing, not a standalone fourth-quarter filing; quarterly figures below are included where useful. Sweetgreen operated 186 company-owned restaurants in 16 states and Washington, D.C., and opened 36 net new restaurants during the year.
Financial performance and liquidity
| Metric | FY 2022 | FY 2021 | Change |
|---|---|---|---|
| Revenue | $470.1 million | $339.9 million | +38% |
| Net loss | $190.4 million | $153.2 million | Loss increased 24% |
| Loss from operations | $193.3 million | $134.4 million | Loss increased |
| Restaurant-Level Profit (non-GAAP) | $69.3 million; 15% margin | $40.4 million; 12% margin | Improved |
| Adjusted EBITDA (non-GAAP) | $(49.9) million; (11)% margin | $(63.1) million; (19)% margin | Loss narrowed |
| Cash used in operating activities | $43.2 million | $64.5 million | Outflow reduced |
| Cash used in investing activities | $102.0 million | $97.5 million | Outflow increased |
Revenue growth reflected $88.1 million from 67 net openings across FY 2021 and FY 2022, plus $43.6 million of comparable-restaurant revenue growth. Adjusted same-store sales increased 13%, comprising a 7% price benefit and 6% transaction growth. Average unit volume rose 11% to $2.905 million. Management notes that growth slowed from June 2022 amid inflation, softer demand, summer travel, COVID cases, and a slower-than-expected return to offices.
Food, beverage, and packaging costs were 28% of revenue, unchanged year over year; labor costs declined to 31% from 32%, and occupancy costs to 10% from 11%. General and administrative expense rose 50% to $187.4 million, largely reflecting a $49.8 million increase in stock-based compensation. FY 2022 stock-based compensation was $78.7 million.
Fourth-quarter revenue was $118.6 million and net loss was $49.3 million. The filing’s quarterly figures reflect accounting and presentation adjustments described in the report.
Cash and cash equivalents were $331.6 million at year-end, down from $472.0 million. Capital expenditures included $96.9 million for property and equipment, primarily restaurant development. The company had no borrowings outstanding under its $45 million revolving credit facility and reported $44.1 million of availability after a $950,000 letter of credit. Management stated that cash and available revolver capacity should fund operating lease obligations, capital expenditures, and working capital for at least 12 months. The credit facility has a minimum-liquidity covenant and is secured by substantially all company and subsidiary-guarantor assets.
Material changes and notable items
- Owned Digital Channels generated 41% of FY 2022 revenue, down from 46%; total digital channels, including third-party marketplaces, generated 62%, down from 67%.
- The company recorded $14.4 million in restructuring charges after reducing Support Center staffing by approximately 5%, moving to a smaller office, and abandoning certain potential restaurant sites. Most of the charge was non-cash.
- Restaurant-Level Profit improved, but GAAP operating and net losses widened. The non-GAAP measures exclude certain costs and should be considered alongside GAAP results.
- Adoption of lease accounting standard ASC 842 resulted in recognition of operating lease assets and liabilities and a $4.9 million cumulative adjustment to accumulated deficit. Prior-year balance-sheet amounts were not restated.
- Sweetgreen reported $300.7 million of operating lease liabilities on the balance sheet. Its commitments table reports $400.2 million of operating-lease cash requirements; the filing also identifies lease commitments for locations not yet in possession.
Outlook, risks, and contingencies
The filing provides no specific numerical revenue, earnings, or opening guidance. Management expects continued investment in restaurants, digital channels, menu development, and automation, while seeking to improve efficiency and achieve profitability on an Adjusted EBITDA basis. The company expected to close additional underperforming restaurants in 2023 and had 20 facilities under construction at year-end, expected to open during 2023.
- Management warned that inflation in wages, food, packaging, and other costs may persist, and pricing actions may not fully offset cost increases without reducing customer demand.
- After year-end, a supplier interruption affected packaging availability, creating potential operational disruption, higher material costs, and possible store closures. Severe weather also disrupted supplies of romaine, arugula, and tomatoes.
- Sales remain exposed to office attendance and urban traffic patterns, discretionary spending, seasonality, weather, competition, and the economics of delivery channels, which carry third-party fees.
- Other significant risks include staffing and retention, new-store execution and site availability, food safety, technology outages and cybersecurity, data-privacy compliance, and the company’s geographic concentration. About 32% of FY 2022 revenue came from the New York City metropolitan area.
- The company is subject to ordinary-course litigation and investigations; management does not believe their resolution will materially affect financial position or results, but adverse outcomes could be material.
- The founders held approximately 58% of voting power through the dual-class share structure. The company does not anticipate paying dividends in the foreseeable future.
The company reported unqualified audit opinions on its financial statements and internal control over financial reporting. A previously identified material weakness was reported as remediated. The auditor identified impairment testing of restaurant property and operating lease assets as a critical audit matter, citing significant judgment in projected future revenue assumptions.
Important facts for investors to verify
- Whether same-store transaction growth and restaurant traffic hold up as the effect of pricing, inflation, and office attendance changes.
- Whether the company can narrow its GAAP losses and Adjusted EBITDA deficit while funding restaurant expansion and technology investment.
- Packaging supply continuity, ingredient availability and costs, and any resulting menu changes or store disruptions.
- Cash burn, capital spending, lease obligations, and continued compliance with the credit facility’s liquidity covenant.
- New restaurant openings, closures, and unit-level performance, including whether the 20 year-end construction projects opened as planned.
- The effect of substantial stock-based compensation, outstanding equity awards, and potential Spyce acquisition milestone consideration on future expenses and dilution.