SWEETGREEN, INC. You should read the following discussion and analysis of our financial condition and results of operations together with the condensed consolidated financial statements and related notes included elsewhere in this report. This discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the sections titled "Risk Factors" and "Special Note Regarding Forward-Looking Statements" and in other parts of this report. Unless the context otherwise requires, all references in this section to "we," "us," "our," the "Company," or "sweetgreen" refer toSweetgreen, Inc. and its subsidiaries. Overview We are a mission-driven, next generation restaurant and lifestyle brand that serves healthy food at scale. Our bold vision is to be as ubiquitous as traditional fast food, but with the transparency and quality that consumers increasingly expect. As ofMarch 27, 2022 , we owned and operated 158 restaurants in 13 states andWashington, D.C. Factors Affecting Our Business
Expanding Restaurant Footprint
Opening new restaurants is an important driver of our revenue growth. During the thirteen weeks endedMarch 27, 2022 andMarch 28, 2021 , we had 8 and 1 Net New Restaurant Openings, respectively, bringing our total count as ofMarch 27, 2022 to 158 restaurants in 13 states andWashington, D.C. We are still in the very nascent stages of our journey, and one of our greatest immediate opportunities is to grow our footprint in both existing and newU.S. markets and, over time, internationally. We have a goal of operating 1,000 restaurants by the end of the decade.
Real Estate Selection
We utilize a rigorous, data-driven real estate selection process to identify new restaurant sites, both in new and existingU.S. markets, with both high anticipated foot traffic and proximity to workplaces and residences that support our multi-channel approach, including our Native Delivery, Marketplace Delivery and Outpost Channels. Macroeconomic Conditions Consumer spending on food outside the home fluctuates with macroeconomic conditions. Consumers tend to allocate higher spending to food outside the home when macroeconomic conditions are stronger, and rationalize spending on food outside the home during weaker economies. As a premium offering in the fast-casual industry, we are exposed both to consumers trading the convenience of food away from home for the cost benefit of cooking, and to consumers selecting less expensive fast-casual alternatives during weaker economic periods. Throughout our history, our customers have demonstrated a willingness to pay a premium for a craveable, convenient, and healthier alternative to traditional fast-food and fast-casual offerings. While we have historically been able to partially offset inflation and other increases, such as wage increases and increases in cost of goods sold, in the costs of core operating resources by gradually increasing menu prices or other customer fees, such as service fees and delivery fees, coupled with more efficient purchasing practices, productivity improvements, and greater economies of scale, there can be no assurance that we will be able to continue to do so in the future. In particular, macroeconomic conditions could make additional menu price increases imprudent. There can be no assurance that future cost increases, including as a result of inflation, can be offset by increased menu prices or that increased menu prices will be fully absorbed by our customers without any resulting change to their visit frequencies or purchasing patterns. 21
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Seasonality
Our revenue fluctuates as a result of seasonal factors. Historically, our revenue is lower in the first and fourth quarters of the year due, in part, to the holiday season and the fact that fewer people eat out during periods of inclement weather (the winter months) than during periods of mild to warm weather (the spring, summer, and fall months). In addition, a core part of our menu, salads, has proven to be more popular among consumers in the warmer months.
Sales Channel Mix
Our revenue is derived from sales of food and beverage to customers through our
five sales channels: In-Store Channel, Pick-Up Channel, Native Delivery Channel,
Marketplace Channel, and Outpost Channel. There have been historical
fluctuations in the mix of sales between our various channels. For example,
during the COVID-19 pandemic, we have experienced a significant increased
percentage of sales through our Owned Digital and Marketplace Channels. Due to
the fact that our Native Delivery, Outpost, and Marketplace Channels require the
payment of third-party fees in order to fulfill deliveries, sales through these
channels have historically negatively impacted our margins. Additionally,
historically, orders on our Native Delivery, Outpost and Marketplace Channels
have resulted in a higher rate of refunds and credits than our In-Store and
Pick-Up Channels, which has a negative impact on revenue on these channels. We
have also historically prioritized promotions and discounts on our Owned Digital
Channels, which also reduces revenue on these channels. If we continue to see a
more permanent shift in sales through these channels, our margins may decrease.
However, over time, we expect that our margins will improve on our Native
Delivery, Outpost, and Marketplace Channels as we scale each of these channels.
We intend to achieve this on Native Delivery and Marketplace Channels via
successful negotiating of lower third-party delivery fees, and on Outpost via
similar negotiation and/or more efficient delivery from couriers. For example,
we recently negotiated lower third party delivery fees for our Native Delivery
Channel on a fixed fee per order basis based on the geographic market and
mileage for each order, which took effect in the fourth fiscal quarter of 2021.
The COVID-19 Pandemic
The COVID-19 pandemic has had a significant impact on our results of operations
and may continue to affect our operations and financial results for the
foreseeable future. Specifically, in the first six weeks of the fiscal quarter
ended March 27, 2022 , the Omicron variant had a material impact on our
transaction volume. However, we started to see improvement in the latter half of
the quarter. As we emerge from the COVID-19 pandemic, we continue to see
variability in our customer traffic patterns, which could continue to impact our
results of operations, financial condition or liquidity. Please see the section
titled "Risk Factors" included under Part I, Item 1A in our Annual Report on
Form 10-K for the fiscal year ended December 26, 2021 .
Key Performance Metrics
We track the following key business metrics and non-GAAP financial measures to
evaluate our performance, identify trends, formulate financial projections, and
make strategic decisions. We believe that these key business metrics, which
includes certain non-GAAP financial measures, provide useful information to
investors and others in understanding and evaluating our results of operations
in the same manner as our management team. These key business metrics and
non-GAAP financial measures are presented for supplemental informational
purposes only, should not be considered a substitute for financial information
presented in accordance with GAAP, and may be different from similarly titled
metrics or measures presented by other companies. See "Non-GAAP Financial
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Measures" below for a reconciliation of Restaurant-Level Profit,
Restaurant-Level Profit Margin, Adjusted EBITDA, and Adjusted EBITDA Margin to
the most directly comparable financial measures stated in accordance with GAAP.
Thirteen Weeks
Ended March 27, Thirteen Weeks Ended
(dollar amounts in thousands ) 2022 March 28, 2021
Net New Restaurant Openings 8 1
Average Unit Volume (as adjusted)(1) $ 2,793 $ 2,075
Same-Store Sales Change (%) 35 % (26 %)
Restaurant-Level Profit $ 13,299 $ 2,102
Restaurant-Level Profit Margin (%) 13 % 3 %
Adjusted EBITDA $ (16,541) $ (21,015)
Adjusted EBITDA Margin (%) (16) % (34) %
Total Digital Revenue Percentage 66 % 77 %
Owned Digital Revenue Percentage 43 % 53 %
(1)Our results for the thirteen weeks ended March 28, 2021 have been adjusted to
reflect the material, temporary closures of 19 restaurants in fiscal year 2020
due to the COVID-19 pandemic by excluding such restaurants from the Comparable
Restaurant Base. Without these adjustments, AUV would have been $1.8 million as
of March 28, 2021 . No restaurants were excluded from the Comparable Restaurant
Base for the thirteen weeks ended March 27, 2022 .
Net New Restaurant Openings
Net New Restaurant Openings reflect the number of new sweetgreen restaurant openings during a given reporting period, net of any permanent sweetgreen restaurant closures during the same given period. Before we open new restaurants, we incur pre-opening costs, as further described below.
Average Unit Volume
AUV is defined as the average trailing revenue for the prior four fiscal quarters for all restaurants in the Comparable Restaurant Base. The measure of AUV allows us to assess changes in guest traffic and per transaction patterns at our restaurants. Comparable Restaurant Base for any measurement period is defined as all restaurants that have operated for at least twelve full months as of the end of such measurement period, other than any restaurants that had a material, temporary closure during the relevant measurement period. As a result of material, temporary closures in fiscal year 2020 due to the COVID-19 pandemic, 19 restaurants were excluded from our Comparable Restaurant Base for the thirteen weeks endedMarch 28, 2021 . No restaurants were excluded from the Comparable Restaurant Base for the thirteen weeks endedMarch 27, 2022 .
Same-Store Sales Change
Same-Store Sales Change reflects the percentage change in year-over-year revenue for the relevant fiscal period for all restaurants that have operated for at least 13 full fiscal months as of the end of such fiscal period; provided, that for any restaurant that has had a temporary closure (which historically has been defined as a closure of at least five days during which the restaurant would have otherwise been open) during any prior or current fiscal month, such fiscal month, as well as the corresponding fiscal month for the prior or current fiscal year, as applicable, will be excluded when calculating Same-Store Sales Change for that restaurant. There were no such closures to any restaurants during the thirteen weeks endedMarch 27, 2022 andMarch 28, 2021 . This measure highlights the performance of existing restaurants, while excluding the impact of new restaurant openings and closures.
Restaurant-Level Profit and Restaurant-Level Profit Margin
We define Restaurant-Level Profit as loss from operations adjusted to exclude
general and administrative expense, depreciation and amortization, pre-opening
costs, loss on disposal of property and equipment, and, in certain periods,
impairment of long-lived assets and closed-store costs. Restaurant-Level Profit
Margin is Restaurant-Level Profit as a percentage of revenue.
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As it excludes general and administrative expense, which is primarily attributable to our sweetgreen Support Center, we evaluate Restaurant-Level Profit and Restaurant-Level Profit Margin as a measure of profitability of our restaurants.
Adjusted EBITDA and Adjusted EBITDA Margin
We define Adjusted EBITDA as net loss adjusted to exclude interest income, interest expense, provision for income taxes, depreciation and amortization, stock-based compensation expense, loss on disposal of property and equipment, Spyce acquisition costs, other income, and, in certain periods, impairment of long-lived assets and closed-store costs. Adjusted EBITDA Margin is Adjusted EBITDA as a percentage of revenue.
Total Digital Revenue Percentage and Owned Digital Revenue Percentage
Our Total Digital Revenue Percentage is the percentage of our revenue attributed
to purchases made through our Total Digital Channels. Our Owned Digital Revenue
Percentage is the percentage of our revenue attributed to purchases made through
our Owned Digital Channels.
Components of Results of OperationsRevenue
We recognize food and beverage revenue, net of discounts and incentives, when payment is tendered at the point of sale as the performance obligation has been satisfied, through our three disaggregated revenue channels: Owned Digital Channels, In-Store-Channel (Non-Digital component), and Marketplace Channel. Provisions for discounts are provided for in the same period the related sales are recorded. Sales taxes and other taxes collected from customers and remitted to governmental authorities are presented on a net basis, and as such, are excluded from revenue. We expect revenue to increase as we focus on opening additional restaurants, as well as investments in our Owned Digital Channels to attract new customers and increase order frequency in our existing customers, as well as any increases in the price of our menu items.
Gift Cards
We also sell gift cards that do not have an expiration date. Upon sale, gift cards are recorded as unearned revenue and included within gift card liability in the accompanying consolidated balance sheets. The revenue from gift cards is recognized when redeemed by customers. Because we do not track addresses of gift card purchasers, the relevant jurisdiction related to the requirement for escheatment, the legal obligation to remit unclaimed assets to the state, is our state of incorporation, which isDelaware . The state ofDelaware requires escheatment after five years from issuance. We do not recognize breakage income because of our requirements to escheat unredeemed gift card balances.
Delivery
All of our restaurant locations offer a delivery option. Delivery services are
fulfilled by third-party service providers whether delivery is ordered through
our Native Delivery Channel or Marketplace Channel. With respect to Native
Delivery Channel sales, we control the delivery services and recognize revenue,
including delivery revenue, when the delivery partner transfers food or beverage
to the customer. For these sales, we receive payment directly from the customer
at the time of sale. With respect to Marketplace Channel sales, we recognize
revenue, excluding delivery fees collected by the delivery partner as we do not
control the delivery service, when control of the food or beverage is delivered
to the end customer. We receive payment from the delivery partner subsequent to
the transfer of food and the payment terms are short-term in nature. For all
delivery sales, we are considered the principal and recognize the revenue on a
gross basis. For a more detailed discussion of our third-party delivery fees and
our expectations regarding our margins, see the section titled "-Sales Channel
Mix" above.
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Restaurant Operating Costs, Exclusive of Depreciation and Amortization
Food, Beverage, and Packaging
Food, beverage, and packaging costs include the direct costs associated with food, beverage, and packaging of our menu items. We anticipate food, beverage and packaging costs on an absolute dollar basis will increase for the foreseeable future to the extent we experience additional in-store orders, as we open additional restaurants, and as a result our revenue grows. However, food, beverage, and packaging costs as a percentage of revenue may vary, as these costs are impacted by menu mix and fluctuations in commodity costs and inflation, as well as geographic scale and proximity.
Labor and Related Expenses
Labor and related expenses include salaries, bonuses, benefits, payroll taxes, workers compensation expenses, and other expenses related to our restaurant employees. As with other variable expense items, we expect labor costs to grow as our revenue grows. Factors that influence labor costs include minimum wage and payroll tax legislation, inflation, a challenging labor market, health care costs, and the size and location of our restaurants.
Occupancy and Related Expenses
Occupancy and related expenses consist of restaurant-level occupancy expenses (including rent, common area expenses and certain local taxes), maintenance and utilities, and exclude occupancy expenses associated with unopened restaurants, which are recorded separately in pre-opening costs. We anticipate occupancy and related expenses on an absolute dollar basis will increase for the foreseeable future to the extent we continue to open new restaurants and revenue grows. Occupancy and related expenses as a percentage of revenue are impacted by geographic location, type of restaurant build, and amount of revenue.
Other Restaurant Operating Costs
Other restaurant operating costs include other operating expenses incidental to operating our restaurants, such as third-party delivery fees, non-perishable supplies, repairs and maintenance, restaurant-level marketing, credit card fees and property insurance. We expect that other restaurant operating costs will increase on an absolute dollar basis for the foreseeable future to the extent we continue to open new restaurants and our revenue grows. Other restaurant operating costs as a percentage of revenue are expected to increase in line with growth in our Native Delivery, Outpost, and Marketplace Channels, as these channels require us to pay third-party delivery fees. However, as revenue increases, we expect that other restaurant operating costs, such as repairs and maintenance and property insurance, as a percentage of revenue will decline. Operating Expenses General and Administrative General and administrative expenses consist primarily of operations, technology, finance, legal, human resources, administrative personnel, and other personnel costs that support restaurant development and operations, as well as stock-based compensation expense, brand-related marketing, and Spyce acquisition costs. We expect that general and administrative expenses will increase on an absolute dollar basis and vary from period to period as a percentage of revenue for the foreseeable future as we focus on processes, systems, and controls to enable our internal support functions to scale with the growth of our business. We also incur expenses as a result of operating as a public company, including expenses to comply with the rules and regulations applicable to companies listed on a national securities exchange, expenses related to compliance and reporting obligations pursuant to the rules and regulations of theSEC , as well as higher expenses for general liability and director and officer insurance, investor relations, and professional services. While we expect that our general and administrative expenses will increase in absolute dollars as our business grows, as a percentage of revenue, we expect these expenses to vary from period to period and decrease over time. 25
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Depreciation and Amortization
Depreciation and amortization include the depreciation of fixed assets, including leasehold improvements and equipment, and the amortization of external costs and certain internal costs directly associated with developing computer software applications for internal use. We expect that depreciation and amortization expenses will increase on an absolute dollar basis as we continue to build new restaurants and make investments in our digital platform.
Pre-Opening Costs
Pre-opening costs primarily consist of rent, wages, travel for training and restaurant opening teams, food, marketing, and other restaurant costs that we incur prior to the opening of a restaurant. These expenses will increase in proportion to the increase of our new restaurant openings. These costs are expensed as incurred. We expect that pre-opening costs will increase on an absolute dollar basis as we continue to build new restaurants and enter new markets.
Loss on Disposal of Property and Equipment
Loss on disposal of property and equipment includes the net book value of assets that have been retired and consists primarily of furniture, equipment and fixtures that were replaced in the normal course of business.
Interest Income and Interest Expense
Interest income consists of interest earned on our cash and cash equivalents. Interest expense includes mainly the interest incurred on our outstanding indebtedness, as well as amortization of deferred financing costs, mainly debt origination and commitment fees.
Other Income
Other income consists primarily of changes in the fair value of our contingent consideration liability. We will continue to remeasure the liability associated with our contingent consideration liability until the underlying service conditions are met, or the performance period expires.
Income Tax Expense
Income tax expense consists of federal and state tax expense on our operating
activity, and changes to our deferred tax asset and deferred tax liability. For
additional information, see Note 12 to our condensed consolidated financial
statements included elsewhere in this Quarterly Report.
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Results of Operations
Comparison of the thirteen weeks ended
The following table summarizes our results of operations for the thirteen weeks
ended
Thirteen Weeks Ended
Percentage
(dollar amounts in thousands) March 27, 2022 March 28, 2021 Dollar Change Change
Revenue $ 102,591 $ 61,392 $ 41,199 67 %
Restaurant operating costs (exclusive of
depreciation and amortization presented
separately below):
Food, beverage, and packaging 27,106 17,268 9,838 57 %
Labor and related expenses 34,302 22,292 12,010 54 %
Occupancy and related expenses 14,800 10,049 4,751 47 %
Other restaurant operating costs 13,084 9,681 3,403 35 %
Total cost of restaurant operations 89,292 59,290 30,002 51 %
Operating expenses:
General and administrative 49,672 23,380 26,292 112 %
Depreciation and amortization 10,677 7,847 2,830 36 %
Pre-opening costs 2,512 961 1,551 161 %
Loss on disposal of property and equipment 8 51 (43) (84 %)
Total operating expenses 62,869 32,239 30,630 95 %
Loss from operations (49,570) (30,137) (19,433) 64 %
Interest income (168) (112) (56) 50 %
Interest expense 23 20 3 15 %
Other income (245) - (245) 100 %
Net loss before income taxes (49,180) (30,045) (19,135) 64 %
Income tax expense 20 - 20 100 %
Net loss $ (49,200) $ (30,045) $ (19,115) 64 %
Revenue
Thirteen Weeks Thirteen Weeks
Ended March 27, Ended March 28, Percentage
(dollar amounts in thousands) 2022 2021 Change
Revenue 102,591 61,392 67 %
Average Unit Volume 2,793 2,075 35 %
Same-Store Sales Change 35 % (26) % 61 %
The increase in revenue for the thirteen weeks ended March 27, 2022 was
primarily due to an increase in Comparable Restaurant Base revenue of $20.9
million , resulting in a positive Same-Store Sales Change of 35%, consisting of a
25% increase from transactions and a benefit from menu price increases of 10%
subsequent to the thirteen weeks ended March 28, 2021 . The increase in
transactions is mostly related to continued recovery from the impact of the
COVID-19 pandemic compared to the thirteen weeks ended March 28, 2021 . The
revenue was also increased by $20.5 million due to 39 Net New Restaurant
Openings during or subsequent to the thirteen weeks ended March 28, 2021 .
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Restaurant Operating Costs
Food, Beverage, and Packaging
Thirteen Weeks Thirteen Weeks
Ended March 27, Ended March 28, Percentage
(dollar amounts in thousands) 2022 2021 Change
Food, beverage, and packaging 27,106 17,268 57 %
As a percentage of total revenue 26 % 28 % (2 %)
The increase in food, beverage, and packaging costs for the thirteen weeks ended
March 27, 2022 was primarily due to a $9.1 million increase in food and beverage
costs and a $0.7 million increase in packaging costs. This was primarily due to
an increase in revenue related to continued recovery from the impact of the
COVID-19 pandemic compared to the thirteen weeks ended March 28, 2021 and the 39
Net New Restaurant Openings during or subsequent to the thirteen weeks ended
March 28, 2021 .
As a percentage of revenue, the decrease in food, beverage, and packaging costs
for the thirteen weeks ended March 27, 2022 was primarily due to greater sales
leverage associated with the continued recovery from the impact of the COVID-19
pandemic and the impact of menu pricing increases of 10% subsequent to the
thirteen weeks ended March 28, 2021 , as well as the termination of the
sweetgreen rewards program, which occurred in the second quarter of fiscal year
2021.
Labor and Related Expenses
Thirteen Weeks Thirteen Weeks
Ended March 27, Ended March 28, Percentage
(dollar amounts in thousands) 2022 2021 Change
Labor and related expenses 34,302 22,292 54 %
As a percentage of total revenue 33 % 36 % (3 %)
The increase in labor and related expenses for the thirteen weeks ended
March 27, 2022 was primarily due to the 39 Net New Restaurant Openings during or
subsequent to the thirteen weeks ended March 28, 2021 . The increase was also due
to an increase in staffing expenses across all restaurant locations, primarily
related to an increase in prevailing wages and an increase in bonus expense,
including a non-recurring retention bonus as we focus on employee retention.
As a percentage of revenue, the decrease in labor and related expenses for the
thirteen weeks ended March 27, 2022 was primarily due to greater sales leverage
associated with the continued recovery from the impact of the COVID-19 pandemic
and the impact of menu pricing increases of 10% subsequent to the thirteen weeks
ended March 28, 2021 , partially offset by the increases noted above.
Occupancy and Related Expenses
Thirteen Weeks Thirteen Weeks
Ended March 27, Ended March 28, Percentage
(dollar amounts in thousands) 2022 2021 Change
Occupancy and related expenses 14,800 10,049 47 %
As a percentage of total revenue 14 % 16 % (2 %)
The increase in occupancy and related expenses for the thirteen weeks ended
March 27, 2022 was primarily due to the 39 Net New Restaurant Openings during or
subsequent to the thirteen weeks ended March 28, 2021 . Further, the additional
increase was due to higher COVID-19 related rent abatement received for multiple
restaurant locations during the thirteen weeks ended March 28, 2021 compared to
the thirteen weeks ended March 27, 2022 .
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As a percentage of revenue, the decrease in occupancy and related expenses for the thirteen weeks endedMarch 27, 2022 was primarily due to greater sales leverage associated with the continued recovery from the impact of the COVID-19 pandemic and the impact of menu pricing increases of 10% subsequent to thirteen weeks endedMarch 28, 2021 . This was partially offset by the impact of higher rent abatement received for multiple restaurant locations during the thirteen weeks endedMarch 28, 2021 as compared to the thirteen weeks endedMarch 27, 2022 .
Other Restaurant Operating Costs
Thirteen Weeks Thirteen Weeks
Ended March 27, Ended March 28, Percentage
(dollar amounts in thousands) 2022 2021 Change
Other restaurant operating costs 13,084 9,681 35%
As a percentage of total revenue 13 % 16 % (3)%
The increase in other restaurant operating costs for the thirteen weeks ended
March 27, 2022 was primarily due to a $0.8 million increase in delivery fees
from the growth in our Native Delivery and Marketplace Channels, a $0.8 million
increase in credit card and online related processing fees, related to the
increases in revenue, a $0.3 million increase in paid advertising, and a $1.5
million increase in kitchen, cleaning and related supplies to support the
increase in restaurants described above.
As a percentage of revenue, the decrease in other costs of operations for the
thirteen weeks ended March 27, 2022 was due to greater sales leverage associated
with the continued recovery from the impact of the COVID-19 pandemic and the
impact of menu pricing increases of 10% subsequent to the thirteen weeks ended
March 28, 2021 .
Operating Expenses
General and Administrative
Thirteen Weeks Thirteen Weeks
Ended March 27, Ended March 28, Percentage
(dollar amounts in thousands) 2022 2021 Change
General and administrative 49,672 23,380 112 %
As a percentage of total revenue 48 % 38 % 10 %
The increase in general and administrative expenses for the thirteen weeks ended
March 27, 2022 was primarily due to a $21.0 million increase in stock-based
compensation expense, primarily related to restricted stock units and
performance-based restricted stock units issued prior to our IPO. We incurred
increased expenses of approximately $1.3 million as we transitioned to operating
as a public company, consisting of a $1.0 million increase in directors and
officers liability insurance cost and a $0.3 million increase in
accounting-related fees. Additionally, we had $1.6 million of expenses related
to our investment in Spyce (see Note 6 to our condensed consolidated financial
statements included elsewhere in this Quarterly Report) of which $1.4 million is
related to research and development and $0.2 million is non-recurring
acquisition related costs. Finally, we had a $0.9 million increase in office
systems, as we continue to focus on growth and scalability, a $0.7 million
increase in marketing and advertising, a $0.2 million increase in COVID
19-related costs, as we continue to support our employees, a $0.5 million
increase in rent and related expense and a $0.1 million increase in other
general and administrative costs.
As a percentage of revenue, the increase in general and administrative expenses
for the thirteen weeks ended March 27, 2022 was primarily due to the increases
noted above, partially offset by the increase in revenue.
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Depreciation and Amortization
Thirteen Weeks Thirteen Weeks
Ended March 27, Ended March 28, Percentage
(dollar amounts in thousands) 2022 2021 Change
Depreciation and amortization 10,677 7,847 36 %
As a percentage of total revenue 10 % 13 % (3 %)
The increase in depreciation and amortization for the thirteen weeks ended
As a percentage of revenue, the decrease in depreciation and amortization for the thirteen weeks endedMarch 27, 2022 was primarily due to comparatively higher revenue in the current period, partially offset by the increases noted above. Pre-Opening Costs Thirteen Weeks Thirteen Weeks Ended March 27, Ended March 28, Percentage (dollar amounts in thousands) 2022 2021 Change Pre-opening costs 2,512 961 161% As a percentage of total revenue 2 % 2 % 0% The increase in pre-opening costs for the thirteen weeks endedMarch 27, 2022 was primarily due to an increase in the number of Net New Restaurant Openings compared to the thirteen weeks endedMarch 28, 2021 , as well as the timing of such openings. As a percentage of revenue, pre-opening costs were flat in the thirteen weeks endedMarch 27, 2022 compared to the thirteen weeks endedMarch 28, 2021 , due to comparatively higher revenue, offset by the increased number of restaurant openings, as well as the timing of such openings, discussed above.
Loss on Disposal of Property and Equipment
Thirteen Weeks Thirteen Weeks
Ended March 27, Ended March 28, Percentage
(dollar amounts in thousands) 2022 2021 Change
Loss on disposal of property and equipment 8 51 (84 %)
As a percentage of total revenue - % - % - %
The decrease in loss on disposal of property and equipment is due to a decrease
in furniture, equipment and fixture replacements at multiple restaurants for the
thirteen weeks ended March 27, 2022 , as our focus has been on opening new
locations.
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Interest Income and Interest Expense
Thirteen Weeks
Ended March 27, Thirteen Weeks Ended Percentage
(dollar amounts in thousands) 2022 March 28, 2021 Change
Interest income (168) (112) 50 %
Interest expense 23 20 15 %
Total interest income, net $ (145) $ (92) 58 %
As a percentage of total revenue - % - % - %
The increase in interest income, net, is primarily due to higher average cash
balances during the thirteen weeks ended
Other Income
Thirteen Weeks Thirteen Weeks
Ended March 27, Ended March 28, Percentage
(dollar amounts in thousands) 2022 2021 Change
Other income (245) - N/A
As a percentage of total revenue - % - % - %
The change in other income for the thirteen weeks ended March 27, 2022 is
primarily due to a decrease in the fair value of our contingent consideration,
which was issued as part of the Spyce acquisition in the third quarter of fiscal
year 2021.
Non-GAAP Financial Measures
In addition to our consolidated financial statements, which are presented in
accordance with GAAP, we present certain non-GAAP financial measures, including
Restaurant-Level Profit, Restaurant-Level Profit Margin, Adjusted EBITDA, and
Adjusted EBITDA Margin. We believe these measures are useful to investors and
others in evaluating our performance because these measures:
•facilitate operating performance comparisons from period to period by isolating
the effects of some items that vary from period to period without any
correlation to core operating performance or that vary widely among similar
companies. These potential differences may be caused by variations in capital
structures (affecting interest expense), tax positions (such as the impact on
periods or companies of changes in effective tax rates or NOL), and the age and
book depreciation of facilities and equipment (affecting relative depreciation
expense);
•are widely used by analysts, investors, and competitors to measure a company's
operating performance; are used by our management and board of directors for
various purposes, including as measures of performance, as a basis for strategic
planning and forecasting; and
•are used internally for a number of benchmarks including to compare our performance to that of our competitors.
We define Restaurant-Level Profit as loss from operations adjusted to exclude
general and administrative expense, depreciation and amortization, pre-opening
costs, loss on disposal of property and equipment, and, in certain periods,
impairment of long-lived assets and closed-store costs. Restaurant-Level Profit
Margin is Restaurant-Level Profit as a percentage of revenue. As it excludes
general and administrative expense, which is primarily attributable to our
sweetgreen Support Center, we evaluate Restaurant-Level Profit and
Restaurant-Level Profit Margin as a measure of profitability of our restaurants.
We define Adjusted EBITDA as net loss adjusted to exclude interest income,
interest expense, provision for income taxes, depreciation and amortization,
stock-based compensation expense, loss on disposal of property and equipment,
Spyce acquisition costs, other income, and, in certain periods, impairment of
long-lived assets and closed-store costs. Adjusted EBITDA Margin is Adjusted
EBITDA as a percentage of revenue.
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Restaurant-Level Profit, Restaurant-Level Profit Margin, Adjusted EBITDA, and
Adjusted EBITDA Margin have limitations as analytical tools, and you should not
consider them in isolation or as substitutes for analysis of our results as
reported under GAAP. In particular, Restaurant-Level Profit and Adjusted EBITDA
should not be viewed as substitutes for, or superior to, loss from operations or
net loss prepared in accordance with GAAP as a measure of profitability. Some of
these limitations are:
•although depreciation and amortization are non-cash charges, the assets being
depreciated and amortized may have to be replaced in the future, and
Restaurant-Level Profit and Adjusted EBITDA do not reflect all cash capital
expenditure requirements for such replacements or for new capital expenditure
requirements;
•Restaurant-Level Profit and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;
•Restaurant-Level Profit and Adjusted EBITDA do not reflect the impact of the recording or release of valuation allowances or tax payments that may represent a reduction in cash available to us;
•Restaurant-Level Profit and Adjusted EBITDA do not consider the potentially dilutive impact of stock- based compensation;
•Restaurant-Level Profit is not indicative of overall results of the Company and does not accrue directly to the benefit of stockholders, as corporate-level expenses are excluded;
•Adjusted EBITDA does not take into account any income or costs that management determines are not indicative of ongoing operating performance, such as stock-based compensation; loss on disposal of property and equipment; Spyce acquisition costs; certain other expenses; and, in certain periods, impairment of long-lived assets and closed-store costs; and
•other companies, including those in our industry, may calculate Restaurant-Level Profit and Adjusted EBITDA differently, which reduces their usefulness as comparative measures.
Because of these limitations, you should consider Restaurant-Level Profit, Restaurant-Level Profit Margin, Adjusted EBITDA and Adjusted EBITDA Margin alongside other financial performance measures, loss from operations, net loss, and our other GAAP results.
The following table sets forth a reconciliation of our loss from operations to Restaurant-Level Profit, as well as the calculation of loss from operations margin and Restaurant-Level Profit Margin for each of the periods indicated:
Thirteen Weeks Thirteen Weeks
Ended March 27, Ended March 28,
(dollar amounts in thousands 2022 2021
Loss from operations $ (49,570) $ (30,137)
Add back:
General and administrative 49,672 23,380
Depreciation and amortization 10,677 7,847
Pre-opening costs 2,512 961
Loss on disposal of property and equipment(1) 8 51
Restaurant-Level Profit $ 13,299 $ 2,102
Loss from operations margin (48) % (49) %
Restaurant-Level Profit Margin 13 % 3 %
__________
__(1)Loss on disposal of property and equipment includes the loss on disposal of assets related to retirements and replacement or write-off of leasehold improvements or equipment.
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Table of Con ten t s
The following table sets forth a reconciliation of our net loss to Adjusted EBITDA, as well as the calculation of net loss margin and Adjusted EBITDA Margin for each of the periods indicated:
Thirteen Weeks Thirteen Weeks
Ended March 27, Ended March 28,
(dollar amounts in thousands 2022 2021
Net loss $ (49,200) $ (30,045)
Non-GAAP adjustments:
Income tax expense 20 -
Interest income (168) (112)
Interest expense 23 20
Depreciation and amortization 10,677 7,847
Stock-based compensation(1) 22,165 1,224
Loss on disposal of property and equipment(2) 8 51
Other income(3) (245) -
Spyce acquisition costs(4) 179 -
Adjusted EBITDA $ (16,541) $ (21,015)
Net loss margin (48) % (49) %
Adjusted EBITDA Margin (16) % (34) %
__________
__
(1)Includes non-cash, stock-based compensation.
(2)Loss on disposal of property and equipment includes the loss on disposal of
assets related to retirements and replacement or write-off of leasehold
improvements or equipment.
(3)Other income includes the change in fair value of the contingent
consideration. See Notes 1 and 3 to our condensed consolidated financial
statements included elsewhere in this Quarterly Report.
(4)Spyce acquisition costs includes one-time costs we incurred in order to
acquire Spyce including, severance payments, retention bonuses, and valuation
and legal expenses. See Note 6 to our condensed consolidated financial
statements included elsewhere in this Quarterly Report.
Liquidity and Capital ResourcesSources and Material Cash Requirements
To date, we have funded our operations through proceeds received from previous common stock and preferred stock issuances, our ability to obtain lending commitments and through cash flow from operations. Additionally, inNovember 2021 , we completed our initial public offering ("IPO"), in which we received net proceeds of$384.7 million from sales of our shares of Class A common stock, after deducting underwriting discounts and commissions and offering expenses. As ofMarch 27, 2022 andDecember 26, 2021 , we had$436.5 million and$472.0 million in cash and cash equivalents, respectively. As ofMarch 27, 2022 we had access to a$35.0 million revolver throughEagleBank and there have been no draws on the revolving loan. With the completion of our IPO, based on our current operating plan, we believe our existing cash and cash equivalents and available revolving loan balances, will be sufficient to fund our operating lease obligations, capital expenditures, and working capital needs for at least the next 12 months. We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities, available cash balances, and available revolving loan balances. If we are unable to generate positive operating cash flows, additional debt and equity financings may be necessary to sustain future operations, and there can be no assurance that such financing will be available to us on commercially reasonable terms, or at all. Our primary liquidity and capital requirements are for new restaurant development, initiatives to improve the customer experience in our restaurants, working capital and general corporate needs. We have not required significant working capital because customers generally pay using cash or credit and debit cards and, as a result, our operations do not require significant receivables. Additionally, our operations do not require significant inventories due, in part, to our use of numerous fresh ingredients. Additionally, we are able to sell most of our inventory items before payment is due to the supplier of such items.
The following table presents our material cash requirements for future periods:
33
--------------------------------------------------------------------------------Table of Con ten t s (amounts in thousands) Total 2022 2023 2024 2025 2026 Thereafter Operating leases$ 410,748 $ 34,179 47,857 48,612 48,338 46,226 185,536 Purchase obligations(1)$ 5,067 $ 5,067 $ - $ - $ - $ - $ -
(1)Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms. The majority of our purchase obligations relate to amounts owed for supplies within our restaurants.
Credit Facility
OnDecember 14, 2020 , we refinanced our previously existing 2017 Revolving Facility withEagleBank (as refinanced and as amended onSeptember 29, 2021 , the "2020 Credit Facility"). The 2020 Credit Facility allows us to borrow (i) up to$35.0 million in the aggregate principal amount under the refinanced revolving facility and (ii) up to$10.0 million in the aggregate principal amount under a new delayed draw term loan facility which expired onDecember 14, 2021 and which was never drawn on. The refinanced revolving facility matures onDecember 14, 2022 , and the term loan facility matures onDecember 15, 2025 . However, if we incur any Permitted Convertible Debt or Permitted Unsecured Indebtedness (each as defined in the 2020 Credit Facility), then each loan facility will mature on the earlier to occur of (i) the maturity date indicated in the previous sentence and (ii) 90 days prior to the scheduled maturity date for any portion of the Permitted Convertible Debt or Permitted Unsecured Indebtedness, as applicable. Under the 2020 Credit Facility, interest accrues on the outstanding loan balance and is payable monthly at a rate of the adjusted one-month London InterBank Offered Rate, plus 2.90%, with a floor on the interest rate at 3.75%. As ofMarch 27, 2022 andDecember 26, 2021 , we had no outstanding balance under the 2020 Credit Facility. Under the 2020 Credit Facility, we are required to maintain liquidity (defined as total cash and cash equivalents on hand plus the available amount under the revolving facility) in amount no less than the trailing 90-day cash burn. We were in compliance with the applicable financial covenants as ofMarch 27, 2022 andDecember 26, 2021 . The obligations under the 2020 Credit Facility are guaranteed by our existing and future material subsidiaries and secured by substantially all of our and our subsidiary guarantor's assets, other than certain excluded assets. The agreement also restricts our ability, and the ability of our subsidiary guarantors to, among other things, incur liens; incur additional indebtedness; transfer or dispose of assets; make acquisitions; change the nature of the business; guarantee obligations; pay dividends to shareholders or repurchase stock; and make advances, loans, or other investments. The agreement contains customary events of default, including, without limitation, failure to pay the outstanding loans or accrued interest on the due date. OnSeptember 29, 2021 , the Company andEagleBank amended the 2020 Credit Facility to, among other things, exclude acquired Spyce intellectual property and assets from theEagleBank collateral package, permit the Company's dual-class capital structure, and enhance the Company's ability to make acquisitions, pursue stock repurchases, and incur indebtedness, and such amendment was effective upon the consummation of our IPO. Under the 2020 Credit Facility, the refinanced revolving facility matures onDecember 14, 2022 , and the term loan facility matures onDecember 15, 2025 . However, if the Company incurs any convertible debt or unsecured indebtedness that are permitted by the 2020 Credit Facility, then each loan facility will mature on the earlier to occur of (i) the maturity date indicated in the previous sentence and (ii) 90 days prior to the scheduled maturity date for any portion of such permitted convertible debt or unsecured indebtedness, as applicable. The amendment did not change any financial covenant requirements. Cash Flows
The following table summarizes our cash flows for the periods indicated:
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Table of Con ten t s
Thirteen weeks Thirteen weeks
ended March 27, ended
(amounts in thousands) 2022 March 28, 2021
Net cash used in operating activities (16,753) (16,464)
Net cash used in investing activities (19,605) (17,853)
Net cash provided by financing activities 849 116,271
Net increase (decrease) in cash and cash equivalents and
restricted cash $ (35,509) $ 81,954
Operating Activities
For the thirteen weeks ended March 27, 2022 , cash used in operating activities
increased $0.3 million compared to the thirteen weeks ended March 28, 2021 . The
increase was primarily due to the impact of unfavorable working capital
fluctuations of $4.7 million , partially offset by a $4.4 million reduction in
loss after excluding non-cash items.
The unfavorable working capital fluctuations were primarily due to a $7.2
million increase in cash outflow related to the timing of rent payments
previously deferred as part of COVID negotiations with landlords, timing of
payment of legal settlements, timing of payment of our D&O insurance, and timing
of payments in the ordinary course of business. These unfavorable fluctuations
were partially offset by increased collection of our tenant improvement
receivables.
Investing Activities
For the thirteen weeks endedMarch 27, 2022 , cash used in investing activities increased$1.8 million compared to the thirteen weeks endedMarch 28, 2021 primarily due to a$1.5 million increase in the purchases of property and equipment, due to an increase in new restaurants, and a$0.2 million increase in the purchase of intangible assets, primarily related to growth in our internal technology from the prior period to support digital growth.
Financing Activities
For the thirteen weeks endedMarch 27, 2022 , cash provided by financing activities decreased$115.4 million compared to the thirteen weeks endedMarch 28, 2021 , primarily due to proceeds received from preferred stock issuances, net of issuance costs, of$113.8 million during the thirteen weeks endedMarch 28, 2021 . In addition, proceeds received from stock option exercises decreased by$1.7 million , which was offset by an increase in deferred offering costs of$0.1 million . Off-Balance Sheet Arrangements
Our material off-balance arrangements are operating lease obligations and purchase obligations. We excluded these items from the balance sheet in accordance with GAAP. For additional information, including the anticipated impacts of our adoption of new accounting standards affecting accounting for leases, see Note 1 and Note 14 to our condensed consolidated financial statements included elsewhere in this Quarterly Report.
Critical Accounting Estimates
The preparation of financial statements in conformity with GAAP requires us to
make certain estimates and assumptions. These estimates and assumptions affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities as of the balance sheet date, as well as reported amounts
of revenue and expenses during the reporting period. Our most significant
estimates and judgments involve difficult, subjective, or complex judgements
made by management. Actual results may differ from these estimates. To the
extent that there are differences between our estimates and actual results, our
future financial statement presentation, financial condition, results of
operations, and cash flows will be affected. We had no significant changes to
our critical accounting estimates as described in our Annual Report on Form 10-K
for the fiscal year ended December 26, 2021 .
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Table of Con ten t s
Recent Accounting Pronouncements
See Note 1 to our condensed consolidated financial statements included elsewhere
in this Quarterly Report for recently adopted accounting pronouncements and
recently issued accounting pronouncements not yet adopted as of the date of this
prospectus.
Emerging Growth Company
We are an emerging growth company ("EGC"), as defined in the Jumpstart Our
Business Startups ("JOBS") Act. The JOBS Act provides that an EGC can take
advantage of an extended transition period for complying with new or revised
accounting standards. This provision allows an EGC to delay the adoption of some
accounting standards until those standards would otherwise apply to private
companies. We have elected to use the extended transition period under the JOBS
Act for the adoption of certain accounting standards until the earlier of the
date we (i) are no longer an EGC or (ii) affirmatively and irrevocably opt out
of the extended transition period provided in the JOBS Act. As a result, our
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
In addition, we intend to rely on the other exemptions and reduced reporting
requirements provided by the JOBS Act. Subject to certain conditions set forth
in the JOBS Act, if, as an EGC, we intend to rely on such exemptions, we are not
required to, among other things (i) provide an auditor's attestation report on
our system of internal controls over financial reporting pursuant to Section
404(b) of the Sarbanes-Oxley Act, (ii) provide all of the compensation
disclosure that may be required of non-emerging growth public companies under
the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with
any requirement that may be adopted by the Public Company Accounting Oversight
Board regarding mandatory audit firm rotation or a supplement to the auditor's
report providing additional information about the audit and the financial
statements (auditor discussion and analysis), and (iv) disclose certain
executive compensation-related items such as the correlation between executive
compensation and performance and comparisons of the Chief Executive Officer's
compensation to median employee compensation.
We will remain an EGC under the JOBS Act until the earliest of (i) the last day
of our first fiscal year following the fifth anniversary of the closing of our
initial public offering, (ii) the last date of our fiscal year in which we have
total annual gross revenue of at least $1.07 billion , (iii) the date on which we
are deemed to be a "large accelerated filer" under the rules of the SEC with at
least $700.0 million of outstanding securities held by non-affiliates, or (iv)
the date on which we have issued more than $1.0 billion in non-convertible debt
securities during the previous three years.
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