CAVA GROUP, INC. Q4 FY2024 earnings call

• 2024 was an extraordinary year with Mediterranean established as a major cuisine category, positive traffic growth, and four consecutive quarters of free cash flow.
• Fourth quarter highlights: 36.8% revenue growth, 21.2% same-restaurant sales growth (15.6% traffic), 15 net new openings, adjusted EBITDA $25.1 million (60% increase Y/Y).
• Full year highlights: 35% revenue growth, 13.4% same-restaurant sales growth (8.7% traffic), 58 net new openings, adjusted EBITDA $126.2 million (71% increase Y/Y), net income $130.3 million.
• Expansion plans: Entering new markets like Detroit, Indianapolis, Pittsburgh; reimagined loyalty program with 230 basis point increase in loyalty percent of sales.
• Culinary innovation: Grilled steak reception strong, new garlic ranch pita chips launched.
• Team member empowerment: New labor and deployment model improving productivity.
• Connected Kitchen initiative: Generative AI video tech live in 4 restaurants, new kitchen display system live in 25 locations with plans to expand to 250 by year-end.

In the fourth quarter of 2024, excluding the impact of the 53rd week in 2023, CAVA revenue grew 36.8% year-over-year to $225.1 million. CAVA same-restaurant sales increased 21.2%, driven by traffic growth of 15.6%. The company opened 15 net new restaurants, ending the year with 367 restaurants. The average unit volume (AUV) increased from $2.6 million at the end of 2023 to $2.9 million at the end of 2024. Excluding the 53rd week in 2023, CAVA restaurant level profit margin was 22.4% of revenue, with food, beverage, and packaging costs at 29.9% of revenue, labor and related costs at 27.3%, occupancy and related expenses at 7.6%, and other operating expenses at 12.8%. For the full year 2024, CAVA revenue increased 35%, same-restaurant sales grew 13.4% including 8.7% traffic growth, 58 net new restaurants were opened, adjusted EBITDA was $126.2 million, net income was $130.3 million, and free cash flow was $52.9 million.

• 2025 guidance: 62-66 net new CAVA restaurant openings, CAVA same-restaurant sales growth of 6% to 8%, CAVA restaurant-level profit margin between 24.8% to 25.2%, preopening costs between $14 million and $15 million, adjusted EBITDA, including the burden of preopening costs, between $150 million to $157 million.
• Menu price adjustment: Approximate 1.7% in-restaurant menu price adjustment in January 2025, no further price increases planned.
• Steak impact: Approximate 100 basis point impact on food costs as a percent of sales to roll off by summer 2025.
• Same-restaurant sales: Three-year stack expected in high 30s, with higher growth in Q1 and moderation later in 2025.

Q: Brian Harbour from Morgan Stanley asked about margins, moving parts, food pressure, and team member investments.

A: Tricia Tolivar responded that food impact from steak (launched June 2024) is a factor, outside steak food inflation is low single digits; labor investments are evaluated quarterly for competitiveness; occupancy should have leverage with sales growth.

Q: Andrew Charles from TD Cowen asked about new focus on speed without sacrificing service and traffic opportunity.

A: Brett Schulman said there's an opportunity at high-volume restaurants, early results of labor deployment show improvement in speed and service scores, and early returns are encouraging but need to avoid negative first-time guest experiences.

Q: Chris O'Cull from Stifel asked about loyalty program baseline frequency and deployment of programs using consumer insights.

A: Brett Schulman said loyalty program has increased revenue flowing through by 230 basis points, over half of reward redemptions from entry-level option; used limited-time offer for garlic ranch pita chips (half points) to drive trial and engagement.

Q: David Tarantino from Baird asked about new unit economics and if guidance assumes $2.3 million AUV.

A: Tricia Tolivar said guidance does assume the $2.3 million AUV for the class opening, and 2024 class performance is strong with confidence in new targets.

Q: Sharon Zackfia from William Blair asked about G&A front, acceleration, and G&A leverage.

A: Tricia Tolivar said G&A grows but at a lesser rate than revenue and unit count growth, and investments in G&A are to drive long-term growth.

Q: Jon Tower from Citi asked about new store productivity and strategic standpoint within markets.

A: Brett Schulman said balanced portfolio approach, robust analytics for market spacing, strong brand awareness from social media and marketing, and community activities to create energy around the brand.

Q: Ivan Yu from Jefferies asked about menu innovation and relative value.

A: Brett Schulman said annual tent pole moments, like Gabby Thomas collaboration, and CAVA's value proposition considering price, quality, relevance of cuisine, convenience, and human connection.

Q: Brian Mullan from Piper Sandler asked about catering sales channel priorities and 2026 plans.

A: Tricia Tolivar said they're testing catering in major metro markets, focusing on packaging and technology, and plan to launch nationally when ready.

Q: Jeffrey Bernstein from Barclays asked about EBITDA growth and long-term algo.

A: Tricia Tolivar said 2025 growth is due to 2024's outsized growth and investments for long-term success, and long-term algo is intact.

Q: Danilo Gargiulo from Bernstein asked about same-store sales guidance and drivers.

A: Tricia Tolivar said same-restaurant sales on 3-year stack expected in high 30s, with Q1 higher and moderation later, and price adjustment at 1.7% with no further increases.

Q: Brian Vaccaro from Raymond James asked about same-store sales and AUVs by region.

A: Tricia Tolivar said three-year stack expected in high 30s in Q1, AUVs increased across all regions from 2.6 million to 2.9 million.

Q: John Ivankoe from JPMorgan asked about KDS and kiosks.

A: Brett Schulman said KDS improves order accuracy, productivity, and customer experience, but kiosks are not expected in CAVA as they believe in human interaction, and orders can be placed via app.