CAVA GROUP, INC. Q3 FY2024 earnings call

• Exceptional third quarter results: 39% revenue increase, 18.1% same-restaurant sales growth, 11 net new restaurants, adjusted EBITDA up 69%, net income up 163%, and $23.4 million free cash flow.
• Drivers of growth: Strong brand, unique value proposition, and disciplined execution. Mediterranean cuisine is meeting consumer demand for bold flavors, well-being, and cultural expression.
• Strategic initiatives: Launched Reimagined Loyalty Program, new labor scheduling model, Project Soul design, Connected Kitchen initiative. Launched Garlic Ranch pita chips and steak.
• Community and guest stories: Bob's positive experience with CAVA, highlighting the brand's mission to bring heart, health, and humanity to food.

CAVA's third quarter 2024 financial results were strong. Revenue grew 39% to $241.5 million. Same-restaurant sales increased 18.1%, with traffic growth of 12.9%. There were 11 net new restaurants, ending the quarter with 352 restaurants. Adjusted EBITDA was $33.5 million, a 69% increase from Q3 2023. Net income was $18 million, a 163% increase. Free cash flow was $23.4 million. Food, beverage, and packaging costs were 29.9% of revenue, labor and related costs 25.4%, occupancy and related expenses 6.8%, and other operating expenses 12.3%.

• Full year 2024: Expect 56 to 58 net new CAVA restaurant openings, same-restaurant sales growth of 12% to 13%, restaurant level profit margin between 24.5% to 25%, pre-opening costs between $12 million and $13 million, and adjusted EBITDA, including the burden of pre-opening costs between $121 million to $126 million.
• 2025: Expect net new restaurant unit growth of at least 17%, restaurant-level margins consistent with 2024, plan to enter South Florida early next year and expand Midwest presence with at least two additional new markets in 2025.

Q: Brian Harbour asked about the new labor scheduling model and its impact on lower buying stores and AUVs.

A: Tricia Tolivar said the new labor and deployment model redeploys existing hours into peak periods, saw modest increase in sales and guest scores in lower volume restaurants, and aims to improve speed and service.

Q: Chris O'Cull asked about comp drivers for next year.

A: Brett Schulman mentioned tentpole and seasonal moments, loyalty program expansion, steak launch, and Garlic Ranch Pita Chip launch as drivers.

Q: Zach Ogden asked about sequential increase in same-store sales from 2Q to 3Q.

A: Tricia Tolivar said the two-year stack showed consistency, with 12.9% traffic growth in Q3.

Q: David Tarantino asked about restaurant margin longer term.

A: Tricia Tolivar said 25% restaurant level margin is strong, and they'll invest mindfully to drive long-term value.

Q: Jon Tower asked about brand awareness growth since IPO.

A: Brett Schulman said awareness is up across age groups and income strata, with Gen Z and Gen Alpha showing strong growth on social channels.

Q: Jeffrey Bernstein asked about new market entry strategy and new store volumes.

A: Tricia Tolivar said they balance growth in new and existing markets, new restaurants have strong sales and cash on cash returns, and real estate teams manage costs well.

Q: Brian Vaccaro asked about comps by meal and new unit AUVs.

A: Tricia Tolivar said comps are broad-based, with balanced dinner and lunch growth, and new restaurants' AUVs exceed expectations but specific numbers not shared.

Q: Ivan Yu asked about contribution of steak to same-store sales and menu innovation.

A: Tricia Tolivar said steak had some impact on mix, and Brett Schulman discussed multiyear menu innovation pipeline including pita chip flavor variations.

Q: Unidentified Analyst asked about new market entry strategy differences between South Florida and Chicago.

A: Tricia Tolivar said they balance new and existing markets, new restaurants perform well with community days and social media driving awareness.

Q: Matt Curtis asked about impact of loyalty program on frequency and sales.

A: Tricia Tolivar said loyalty sales as a percent of revenue increased 200 basis points, but frequency details not shared yet.