Sweetgreen, Inc. - Quarter Report: 2022 September (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 25, 2022


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from______to______

Commission file number 001-41069

SWEETGREEN, INC.

(Exact name of registrant as specified in its charter)


Delaware						27-1159215
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

3102 36th Street Los Angeles, CA						90018
(Address of Principal Executive Offices)						(Zip Code)

(323) 990-7040

Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock	SG	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	o
		Emerging growth company	x

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

The registrant had 97,322,925 shares of Class A common stock and 13,477,303 shares of Class B common stock as of November 2, 2022.

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		Page
Part I Financial Information
Item 1.	Financial Statements	1
	Consolidated Statements of Balance Sheets	1
	Consolidated Statements of Operations	2
	Consolidated Statements of Preferred Stock And Stockholders’ (Deficit) Equity	3
	Consolidated Statements of Cash Flows	5
	Notes to the Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market	42
Item 4.	Controls and Procedures	42

Part II Other Information
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	44
Signatures		45

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations or financial condition, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words or phrases such as “anticipate,” “are confident that,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

•our expectations regarding our revenue, restaurant operating costs, operating expenses, and other results of operations, as well as our key operating metrics;

•our expectations regarding our sales channel mix and impact on our margins and business;

•our expectations regarding the COVID-19 pandemic and the impact on our business and results of operations;

•our expectations about customer behavior trends, including during and following the COVID-19 pandemic and as a result of inflation;

•our expectations regarding the effects of inflation, increased interest rates, and an economic downturn, on our business, including on labor rates and supply chain costs, as well as any future pricing actions taken in an effort to mitigate the effects of inflation;

•our expectations regarding our customers’ willingness to pay our prices for higher quality food;

•our growth strategy and business aspirations, including our goal of operating 1,000 restaurants by the end of the decade;

•our focus on opening additional restaurants, diversifying and expanding our menu, making investments in our Owned Digital Channels to attract new customers and increasing order frequency from our existing customers;

•our expectations regarding the effects of the plan we implemented in August 2022 to manage operating expenses;

•our expectations regarding the impact of automation on our operating model;

•our bold vision to be as ubiquitous as traditional fast food, but with the transparency and quality that consumers increasingly expect;

•potential future investments in our business, our anticipated capital expenditures, and our estimates regarding our capital requirements;

•our ability to achieve or maintain profitability; and

•our ability to effectively manage and scale our supply chain.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in 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 Part II, Item 1A in our Quarterly Report on Form 10-Q for the fiscal quarter ended June 26, 2022, and elsewhere in this Quarterly Report. Moreover, we operate in a very competitive and rapidly changing environment.

New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that contain “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry

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into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this Quarterly Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report to reflect events or circumstances after the date of this Quarterly Report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments.

GLOSSARY

General

Comparable Restaurant Base. 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. Historically, a restaurant has been considered to have had a material, temporary closure if it had no operations for a consecutive period of at least 30 days. One restaurant was excluded from the Comparable Restaurant Base for the thirteen and thirty-nine weeks ended September 25, 2022 due to temporary closures. No restaurants were excluded from the Comparable Restaurant Base for the thirteen and thirty-nine weeks ended September 26, 2021.

Channels

We have five main sales channels: In-Store, Marketplace, Native Delivery, Outpost, and Pick-Up. We own and operate all of these channels other than our Marketplace Channel, which is operated by various third-party delivery marketplaces.

In-Store Channel. In-Store Channel refers to sales to customers who make in-store purchases in our restaurants, whether they pay by cash, credit card, or digital scan-to-pay. Purchases made in our In-Store Channel via cash or credit card are referred to as “Non-Digital” transactions, and purchases made in our In-Store Channel via digital scan-to-pay are included as part of our Owned Digital Channels.

Marketplace Channel. Marketplace Channel refers to sales to customers for delivery or pick-up made through third-party delivery marketplaces, including Caviar, DoorDash, Grubhub, Postmates, and Uber Eats.

Native Delivery Channel. Native Delivery Channel refers to sales to customers for delivery made through the sweetgreen website or mobile app.

Outpost Channel. Outpost Channel refers to sales to customers for delivery made through the sweetgreen website or mobile app to our Outposts, which are our trademark offsite drop-off points at offices, residential buildings, and hospitals.

Owned Digital Channels. Owned Digital Channels encompasses our Pick-Up Channel, Native Delivery Channel, and Outpost Channel, and purchases made in our In-Store Channel via digital scan-to-pay.

Pick-Up Channel. Pick-Up Channel refers to sales to customers made for pick up at one of our restaurants through the sweetgreen website or mobile app.

Total Digital Channels. Total Digital Channels consist of our Owned Digital Channels and our Marketplace Channel, and include our revenues from all of our channels except those from Non-Digital transactions made through our In-Store Channel.

Key Metrics and Non-GAAP Financial Measures

For definitions of our key metrics, Average Unit Volume (“AUV”), Net New Restaurant Openings, Same-Store Sales Change, Total Digital Revenue Percentage, and Owned Digital Revenue Percentage, see the section titled

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“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Performance Metrics.” For definitions of our Non-GAAP Financial Measures, Restaurant-Level Profit, Restaurant-Level Profit Margin, Adjusted EBITDA, and Adjusted EBITDA Margin, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.”

Restaurant-Level Profit, Restaurant-Level Profit Margin, Adjusted EBITDA, and Adjusted EBITDA Margin are financial measures that are not calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”). See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for more information, including the limitations of such measures, and a reconciliation of each of these measures to the most directly comparable financial measures stated in accordance with GAAP.

iii

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PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SWEETGREEN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share amounts)


	As of September 25, 2022		As of December 26, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	381,035	$	471,971
Accounts receivable	4,579		2,644
Inventory	1,202		903
Prepaid expenses	10,087		13,763
Tenant improvement receivable	15,148		16,695
Current portion of lease acquisition costs	627		525
Other current assets	815		155
Total current assets	413,493		506,656
Property and equipment, net	208,270		180,666
Goodwill	35,970		35,970
Intangible assets, net	30,670		32,868
Lease acquisition costs, net	5,512		4,391
Security deposits	1,609		1,770
Other assets	4,543		—
Restricted cash	166		328
Total assets	$	700,233	$	762,649
LIABILITIES, AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	8,688	$	11,197
Accrued expenses	16,543		16,338
Accrued payroll	11,464		12,093
Gift cards and loyalty liability	1,643		1,839
Current portion of deferred rent liability	7,100		6,061
Other current liabilities	2,175		—
Total current liabilities	47,613		47,528
Deferred rent liability, net of current portion	49,709		38,402
Accrued payroll, net of current portion	—		2,500
Contingent consideration liability	18,322		20,477
Other non-current liabilities	967		500
Deferred income tax liabilities	184		125

Total liabilities	$	116,795	$	109,532
COMMITMENTS AND CONTINGENCIES (Note 14)


Stockholders’ equity:
Common stock, $0.001 par value per share, 2,000,000,000 Class A shares authorized, 97,275,477 and 95,868,394 Class A shares issued and outstanding as of September 25, 2022 and December 26, 2021, respectively; 300,000,000 Class B shares authorized, 13,477,303 and 13,477,303 Class B shares issued and outstanding as of September 25, 2022 and December 26, 2021, respectively	111		109

Additional paid-in capital	1,196,173		1,129,224
Accumulated deficit	(612,846)		(476,216)
Total stockholders’ equity	583,438		653,117
Total liabilities and stockholders’ equity	$	700,233	$	762,649

The accompanying notes are an integral part of these condensed consolidated financial statements.

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SWEETGREEN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except share and per share amounts)


	Thirteen weeks ended				Thirty-nine weeks ended
	September 25, 2022		September 26, 2021		September 25, 2022		September 26, 2021
Revenue	$	124,026	$	95,844	$	351,535	$	243,448
Restaurant operating costs (exclusive of depreciation and amortization presented separately below):
Food, beverage, and packaging	34,474		26,701		95,477		67,125
Labor and related expenses	38,006		30,316		109,321		79,343
Occupancy and related expenses	17,188		14,053		47,815		35,919
Other restaurant operating costs	14,535		11,640		42,753		33,001
Total restaurant operating costs	104,203		82,710		295,366		215,388
Operating expenses:
General and administrative	41,381		28,944		142,313		78,395
Depreciation and amortization	11,887		9,303		33,870		25,558
Pre-opening costs	3,061		2,789		8,093		6,256
Impairment of long-lived assets and closed-store costs	1,693		4,415		1,845		4,415
Loss on disposal of property and equipment	21		—		41		56
Restructuring charges	11,081		—		11,081		—
Total operating expenses	69,124		45,451		197,243		114,680
Loss from operations	(49,301)		(32,317)		(141,074)		(86,620)
Interest income	(1,644)		(78)		(2,406)		(299)
Interest expense	23		23		68		65
Other (income) expense	(303)		(2,196)		(2,166)		608
Net loss before income taxes	(47,377)		(30,066)		(136,570)		(86,994)
Income tax expense	20		—		60		—
Net loss	$	(47,397)	$	(30,066)	$	(136,630)	$	(86,994)
Earnings per share:
Net loss per share basic and diluted	$	(0.43)	$	(1.58)	$	(1.24)	$	(4.88)
Weighted average shares used in computing net loss per share basic and diluted	110,375,126		19,084,124		109,848,272		17,836,525

The accompanying notes are an integral part of these condensed consolidated financial statements.

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SWEETGREEN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF PREFERRED STOCK AND STOCKHOLDERS’ (DEFICIT) EQUITY

(UNAUDITED)

(in thousands, except share amounts)


	For the thirteen weeks ended September 25, 2022 and September 26, 2021
	Preferred Stock			Class S Stock			Common Stock			Additional Paid-in Capital		Loans to Related Parties		Accumulated Deficit		Total
	Shares	Amount		Shares	Amount		Shares	Amount
Balances at June 27, 2021	69,231,197	$	614,496	—	$	—	17,635,784	$	18	$	26,523	$	(4,000)	$	(379,969)	$	(357,428)
Net loss	—	—		—	—		—	—		—		—		(30,066)		(30,066)
Exercise of stock options	—	—		—	—		4,243,589	4		21,546		—		—		21,550
Exercise of common stock warrants	—	—		—	—		14,333	—		32		—		—		32
Issuance of Class S Stock	—	—		1,843,493	2		—	—		30,702		—		—		30,704
Stock-based compensation expense	—	—		—	—		—	—		2,832		—		—		2,832
Repayment of related party loan	—	—		—	—		—	—		1,159		4,000		—		5,159
Balances at September 26, 2021	69,231,197	$	614,496	1,843,493	$	2	21,893,706	$	22	$	82,794	$	—	$	(410,035)	$	(327,217)

Balances at June 26, 2022	—	$	—	—	$	—	109,963,357	$	110	$	1,177,522	$	—	$	(565,449)	$	612,183
Net loss	—	—		—	—		—	—		—		—		(47,397)		(47,397)
Exercise of stock options	—	—		—	—		258,844	1		1,050		—		—		1,051
Issuance of common stock related to restricted shares	—	—		—	—		530,579	—		—		—		—		—

Stock-based compensation expense	—	—		—	—		—	—		17,601		—		—		17,601
Balances at September 25, 2022	—	$	—	—	$	—	110,752,780	$	111	$	1,196,173	$	—	$	(612,846)	$	583,438

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	For the thirty-nine weeks ended September 25, 2022 and September 26, 2021
	Preferred Stock			Class S Stock			Common Stock			Additional Paid-in Capital		Loans to Related Parties		Accumulated Deficit		Total
	Shares	Amount		Shares	Amount		Shares	Amount
Balances at December 27, 2020	62,562,051	$	505,638	—	$	—	16,731,625	$	17	$	19,662	$	(4,000)	$	(323,041)	$	(307,362)
Net loss	—	—		—	—		—	—		—		—		(86,994)		(86,994)
Exercise of stock options	—	—		—	—		5,147,748	5		25,310		—		—		25,315
Exercise of common stock warrants	—	—		—	—		14,333	—		32		—		—		32
Issuance of Class S Stock	—	—		1,843,493	2		—	—		30,702		—		—		30,704
Stock-based compensation expense	—	—		—	—		—	—		5,929		—		—		5,929
Issuance of preferred stock (net of issuance costs of $226)	6,669,146	108,858		—	—		—	—		—		—		—		—
Repayment of related party loan	—	—		—	—		—	—		1,159		4,000		—		5,159
Balances at September 26, 2021	69,231,197	$	614,496	1,843,493	$	2	21,893,706	$	22	$	82,794	$	—	$	(410,035)	$	(327,217)

Balances at December 26, 2021	—	$	—	—	$	—	109,345,697	$	109	$	1,129,224	$	—	$	(476,216)	$	653,117
Net loss	—	—		—	—		—	—		—		—		(136,630)		(136,630)
Exercise of stock options	—	—		—	—		819,454	2		3,976		—		—		3,978
Issuance of common stock related to restricted shares	—	—		—	—		587,629	—		—		—		—		—


Stock-based compensation expense	—	—		—	—		—	—		62,973		—		—		62,973

Balances at September 25, 2022	—	$	—	—	$	—	110,752,780	$	111	$	1,196,173	$	—	$	(612,846)	$	583,438

The accompanying notes are an integral part of these condensed consolidated financial statements.

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SWEETGREEN, INC.AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


	Thirty-nine weeks ended
	September 25, 2022		September 26, 2021
Cash flows from operating activities:
Net loss	$	(136,630)	$	(86,994)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	33,870		25,558
Amortization of lease acquisition	402		300
Amortization of loan origination fees	112		68
Loss on fixed asset disposal	41		56
Stock-based compensation	62,973		6,104
Impairment of long-lived assets and closed-store costs	1,845		4,415
Non-cash restructuring charges	9,841		—
Deferred income tax expense	59		—
Change in fair value of contingent consideration liability	(2,155)		—
Change in fair value of preferred stock warrant liability	—		608
Changes in operating assets and liabilities:
Accounts receivable	(1,935)		(1,363)
Tenant improvement receivables	1,547		(10,830)
Inventory	(299)		(213)
Prepaid expenses and other assets	(1,639)		146
Accounts payable	(822)		3,539
Accrued payroll and benefits	(3,129)		10,396
Accrued expenses	205		(3,384)
Gift card and loyalty liability	(196)		(988)
Other non-current liabilities	(517)		—
Deferred rent liability	12,346		16,367
Net cash used in operating activities	(24,081)		(36,215)
Cash flows from investing activities:
Purchase of property and equipment	(65,979)		(60,070)
Purchase of intangible assets	(3,552)		(5,438)
Acquisition, net of cash and cash equivalents acquired	—		(3,340)
Security and landlord deposits	161		242
Lease acquisition costs	(1,625)		(1,140)
Net cash used in investing activities	(70,995)		(69,746)
Cash flows from financing activities:


Proceeds from preferred stock issuance, net of issuance costs	—		113,811
Proceeds from stock option exercise	3,978		25,347
Deferred offering costs paid	—		(3,793)
Proceeds from related party loan	—		5,158
Proceeds from exercise of warrants	—		32
Net cash provided by financing activities	3,978		140,555
Net (decrease) increase in cash and cash equivalents and restricted cash	(91,098)		34,594
Cash and cash equivalents and restricted cash—beginning of year	472,299		102,765
Cash and cash equivalents and restricted cash—end of period	$	381,201	$	137,359
Supplemental disclosure of cash flow information

Purchase of property and equipment accrued in accounts payable and accrued expenses	$	702	$	2,431
Non-cash investing and financing activities
Deferred offering costs not yet paid	$	—	$	1,246
Initial liability associated with Series J warrants	$	—	$	4,953
Acquisition non-cash consideration	$	—	$	30,704
Initial liability associated with contingent consideration	$	—	$	16,440

The accompanying notes are an integral part of these condensed consolidated financial statements.

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SWEETGREEN, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Sweetgreen, Inc., a Delaware corporation, together with its wholly owned subsidiaries (the “Company”), is a mission-driven, next generation restaurant and lifestyle brand that serves healthy food at scale. The Company’s bold vision is to be as ubiquitous as traditional fast food, but with the transparency and quality that consumers increasingly expect. As of September 25, 2022, the Company owned and operated 176 restaurants in 16 states and Washington, D.C. During the thirteen and thirty-nine weeks ended September 25, 2022, the Company had 10 and 26 Net New Restaurant Openings, respectively.

The Company was founded in November 2006 and incorporated in the state of Delaware in October 2009 and currently is headquartered in Los Angeles, California. The Company’s operations are conducted as one operating segment and one reportable segment, as the Company’s chief operating decision maker, who is the Company’s Chief Executive Officer, reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance. The Company’s revenue is primarily derived from retail sales of food and beverages by company-owned restaurants.

The Company has prepared the accompanying unaudited condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair presentation of the Company’s financial position and results of operations. Interim results of operations are not necessarily indicative of the results that may be achieved for the full year. The financial statements and related notes do not include all information and footnotes required by U.S. generally accepted accounting principles for annual reports and should be read in conjunction with the consolidated financial statements for the year ended December 26, 2021.

Principles of Consolidation—The accompanying condensed consolidated financial statements include the accounts of the Company. All intercompany balances and transactions have been eliminated in consolidation.

Fiscal Year—The Company’s fiscal year is a 52- or 53-week period that ends on the Sunday closest to the last day of December. Fiscal year 2022 is a 52-week period that ends December 25, 2022 and fiscal year 2021 was a 52-week period that ended December 26, 2021. In a 52-week fiscal year, each quarter includes 13 weeks of operations. In a 53-week fiscal year, the first, second and third quarters each include 13 weeks of operations, and the fourth quarter includes 14 weeks of operations.

Management’s Use of Estimates—The condensed consolidated financial statements have been prepared by the Company in accordance with GAAP and the rules and regulations of the SEC. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates made by the Company include the income tax valuation allowance, impairment of long-lived assets, closed-store costs, legal liabilities, fair value of contingent consideration, intangible assets acquired in business combinations, goodwill and stock-based compensation. These estimates are based on information available as of the date of the condensed consolidated financial statements; therefore, actual results could differ from those estimates.

Emerging Growth Company—The Company is currently an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote

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on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

The Company will lose its emerging growth company status on December 25, 2022, at which point, it will qualify as a large accelerated filer based upon the aggregate worldwide market value of the Company's voting and non-voting common equity held by its non-affiliates as of June 26, 2022, according to Rule 12b-2 of the Exchange Act. As a result, the Company will adopt all accounting pronouncements currently deferred under the emerging growth company election according to public company standards on the Company’s Annual Report on Form 10-K for the fiscal year ended December 25, 2022. The adoption dates for the new accounting pronouncements disclosed below have been presented as such.

Fair Value of Financial Instruments—The fair value measurement accounting guidance creates a fair value hierarchy to prioritize the inputs used to measure fair value into three categories. A financial instrument’s level within the fair value hierarchy is based on the lowest level of input significant to the fair value measurement, where Level 1 is the highest category (observable inputs) and Level 3 is the lowest category (unobservable inputs). The three levels are defined as follows:

Level 1—Quoted prices for identical instruments in active markets.

Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or

similar instruments in markets that are not active and model-derived valuations in which significant value drivers are observable.

Level 3—Unobservable inputs for the asset or liability. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The carrying amount of accounts receivable, tenant improvement allowance receivable, other current assets, accounts payable, accrued payroll and accrued expenses approximates fair value due to the short-term maturity of these financial instruments. The Company’s contingent consideration is carried at fair value determined using Level 3 inputs in the fair value. For further details see Note 3.

Certain assets and liabilities are measured at fair value on a nonrecurring basis. In other words, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). For further details see Note 3.

Impairment of Long-Lived Assets and Closed-Store Costs— Long-lived assets are reviewed for recoverability at the lowest level in which there are identifiable cash flows (“asset group”). The asset group is at the store-level for restaurant assets and the corporate-level for corporate assets. The carrying amount of a store asset group includes stores’ property and equipment, primarily leasehold improvements. Long-lived assets, including property and equipment and internally developed software, are reviewed by management for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be fully recoverable. When events or circumstances indicate that impairment may be present, management evaluates the probability that future undiscounted net cash flows received will be less than the carrying amount of the asset group. If projected future undiscounted cash flows are less than the carrying

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value of an asset group, then such assets are written down to their fair values. The Company uses a discounted cash flows model to measure the fair value of an asset group. An impairment charge will be recognized in the amount by which the carrying amount of the store asset group exceeds its fair value. A number of significant assumptions and estimates are involved in the application of the model to forecast operating cash flows, which are largely unobservable inputs and, accordingly, are classified as Level 3 inputs within the fair value hierarchy. Assumptions used in these forecasts are consistent with internal planning, and include sales growth rates, gross margins, and operating expense in relation to the current economic environment and the Company’s future expectations, competitive factors in its various markets, inflation, sales trends and other relevant economic factors that may impact the store under evaluation.

There is uncertainty in the projected undiscounted future cash flows used in the Company’s impairment review analysis, which requires the use of estimates and assumptions. If actual performance does not achieve the projections, or if the assumptions used change in the future, the Company may be required to recognize impairment charges in future periods, and such charges could be material. The Company determined that triggering events, primarily related to the impact of changing customer behavior trends, including slower than expected return to office during and following the COVID-19 pandemic (including as a result of many workplaces adopting remote or hybrid models) and as a result of broader macroeconomic conditions on the Company’s near-term restaurant level cash flow forecasts and anticipated store closures, occurred for certain restaurants during the thirteen and thirty-nine weeks ended September 25, 2022 and September 26, 2021 that required an impairment review of the Company’s long-lived assets. Based on the results of this analysis and management’s intent to close one of its locations, the Company recorded non-cash impairment charges of $1.7 million for the thirteen and thirty-nine weeks ended September 25, 2022. The Company recorded non-cash impairment charges of $4.4 million for the thirteen and thirty-nine weeks ended September 26, 2021, related to certain Company restaurants, as well as to the two restaurants operated by Spyce Food Co. (“Spyce”). See Note 6.

Closed-store costs include non-cash restaurant charges, such as up-front expensing of the net present value of unpaid rent remaining on the life of a lease, offset by assumed sublease income. During the thirty-nine weeks ended September 25, 2022, the Company closed one store operated by Spyce, which was fully impaired in a prior period. This closure resulted in a non-cash expense of $0.2 million, recorded within impairment of long-lived assets and closed-store costs in the consolidated statement of operations.

Restructuring Charges- Restructuring charges are expenses that are paid in connection with reorganization of the Company’s operations, and are considered a type of exit activity in accordance with ASC 420. For the thirteen and thirty-nine weeks ended September 25, 2022, the Company recorded an $11.1 million restructuring charge, in accordance with the aforementioned guidance. These costs were primarily related to a $9.8 million non-cash restructuring expense, due to a reduction of the Company’s real estate footprint by vacating the premises for the existing sweetgreen Support Center and moving to a smaller office space adjacent to the existing location, of which $6.8 million related to abandonment of the long-lived assets associated with the sweetgreen Support Center and $3.0 million related to the future lease liability, offset by assumed sublease income, $0.6 million of severance and related benefits from workforce reductions affecting approximately 5% of employees at the sweetgreen Support Center, $0.6 million of costs related to abandoning certain potential future restaurant sites in an effort to streamline the Company’s future new restaurant openings, and $0.1 million of other related expenses. As of September 25, 2022, the future lease liability is $2.7 million and is recorded within other current liabilities and other non-current liabilities in the Company’s accompanying condensed consolidated balance sheet.

Business Combinations—The Company utilizes the acquisition method of accounting in any acquisitions or business combinations. The acquisition method of accounting requires companies to assign values to assets and liabilities acquired based upon their fair values at the acquisition date. In most instances, there are not readily defined or listed market prices for individual assets and liabilities acquired in connection with a business, including intangible assets. The determination of fair value for assets and liabilities in many instances requires a high degree of estimation. The valuation of intangible assets, in particular, is very subjective. The Company generally obtains third-party valuations to assist it in estimating fair values. The use of different valuation techniques and assumptions could change the amounts and useful lives assigned to the assets and liabilities acquired and related amortization expense. Total research and development excluding any related cost associated with the Spyce acquisition was $0.4 million and $1.4 million for the thirteen and thirty-nine weeks ended September 25, 2022 and recorded within general and administrative cost in the Company’s accompanying condensed consolidated statement of operations.

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Contingent Consideration - Due to certain conversion features, the contingent consideration issued as part of the Spyce acquisition is considered a liability in accordance with ASC 480. The liability associated with the contingent consideration is initially recorded at fair value upon the issuance date and is subsequently re-measured to fair value at each reporting date. See Notes 3 and 6. The initial fair value of the liability for the contingent consideration was $16.4 million and was included as part of the purchase price for the Spyce acquisition. The fair value of the liability as of September 25, 2022 was $18.3 million.

Changes in fair value of the contingent consideration is recognized within other (income) expense in the accompanying condensed consolidated statement of operations.

Cash and Cash Equivalents—The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Amounts receivable from credit card processors are converted to cash shortly after the related sales transaction and are considered to be cash equivalents because they are both short-term and highly liquid in nature. Amounts receivable from sales transactions as of September 25, 2022 and December 26, 2021, were $2.1 million and $1.1 million, respectively.

Restricted Cash—The Company’s restricted cash balance relates to certificates of deposit that are collateral for letters of credit to lease agreements entered into by the Company.

The reconciliation of cash and cash equivalents and restricted cash presented in the Company’s accompanying condensed consolidated balance sheets to the total amount shown in its condensed consolidated statements of cash flows is as follows:


(dollar amounts in thousands)	As of September 25, 2022		As of December 26, 2021
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	381,035	$	471,971
Restricted cash, noncurrent	166		328
Total cash, cash equivalents and restricted cash shown on statement of cash flows	$	381,201	$	472,299

Concentrations of Risk—The Company maintains cash balances at several financial institutions located in the United States. The cash balances may, at times, exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to $0.3 million.

During the thirteen weeks ended September 25, 2022 and September 26, 2021, approximately 32% and 33% of the Company’s revenue was generated from the Company’s restaurants located in the New York City metropolitan area, respectively. During the thirty-nine weeks ended September 25, 2022 and September 26, 2021, approximately 32% and 33% of the Company’s revenue was generated from the Company’s restaurants located in the New York City metropolitan area, respectively.

Deferred Costs—Deferred costs primarily consist of capitalized implementation costs from cloud computing arrangements in relation to a new enterprise resource planning system (“ERP”). These costs amounted to $5.3 million as of September 25, 2022 and are recorded within other current assets and other assets in the condensed consolidated balance sheets. The amortization of these costs are recognized within the Company’s condensed consolidated statement of operations under general and administrative expenses over a useful life of 7 years. Prior to the Company’s initial public offering (the “IPO”), deferred costs also included direct incremental legal, consulting, accounting, and other fees relating to the sale of the Company’s Class A Common Stock which were reclassified into stockholder’s deficit as a reduction of IPO proceeds upon offering.

Recently Issued Accounting Pronouncements Not Yet Adopted— As noted above, the Company will lose its emerging growth company status on December 25, 2022, at which point, the Company will adopt all accounting pronouncements currently deferred under the emerging growth company election according to public company standards on the Company’s Annual Report on Form 10-K for the fiscal year ended December 25, 2022. See effective dates of these standards below.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases. This update requires lessees to recognize in the condensed consolidated balance sheet assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a

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lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP—which requires only capital leases to be recognized in the condensed consolidated balance sheet—the new ASU will require both types of leases to be recognized by a lessee in the condensed consolidated balance sheet. In June 2020, the FASB issued ASU No. 2020-05 which delayed the effective date to fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early application is permitted. The ASU will be adopted for the annual period beginning December 27, 2021, and the first presentation of the application of ASC 842, Leases, will be presented in the Company’s annual consolidated financial statements for fiscal year 2022 included within the Company’s 2022 Annual Report on Form 10-K. The Company plans on electing the optional transition method to apply the standard as of the effective date and therefore, will not apply the standard to the comparative periods presented in its financial statements. The Company does not plan on electing the package of three practical expedients, and thus will reassess all contracts for lease identification, lease classification and initial direct costs. The Company anticipates there will be no change related to lease identification or lease classification and the reassessment of initial direct costs will result in a cumulative-effect adjustment in retained earnings of approximately $4.2 million, related to previously capitalized legal fees that will no longer meet the definition of initial direct costs under the new standard. Additionally, the Company anticipates recognizing a cumulative-effect adjustment in retained earnings of approximately $0.4 million to $0.5 million, related to impairment of right-of-use assets existing as of the implementation date. The Company will also not elect the hindsight practical expedient, which permits the use of hindsight when determining lease term and impairment of right-of-use assets. Further, the Company will elect a short-term lease exception policy, permitting it to not apply the recognition requirements of this standard to short-term leases (i.e. leases with terms of 12 months or less) and an accounting policy to account for lease and non-lease components as a single component for all real property leases. The Company is finalizing the impact of this standard on its accounting policies, processes, and internal controls over financial reporting, as well as upgrades to its existing lease system.

While the Company is still evaluating this ASU, the Company has determined that the primary impact will be to recognize in the consolidated balance sheets all operating leases with lease terms greater than 12 months. It is expected that this ASU will have a material impact on the Company’s condensed consolidated balance sheet as it will record assets and obligations related to all of its operating and corporate office leases. The Company expects to record on its consolidated balance sheets operating lease liabilities of approximately $263.0 million to $291.0 million, as of its implementation date and excludes lease commencement, modification or other activity that occurred during fiscal year-ended 2022, based on the present value of the remaining minimum rental payments using discount rates as of the effective date. The Company also expects to record corresponding right-of-use assets of approximately $222.0 million to $246.0 million, as of its implementation date and excludes lease commencement, modification or other activity that occurred during fiscal year-ended 2022, based upon the operating lease liability, adjusted for prepaid and deferred rent, unamortized initial direct costs, liabilities associated lease termination costs and impairment of right-of-use assets recognized in retained earnings, if applicable. As the Company’s fiscal year 2022 Form 10-Qs are currently under ASC 840, when it adopts this standard in its fiscal year 2022 Form 10-K the Company anticipates recognizing an additional $1.5 million to $2.0 million for the entire fiscal year 2022, of general and administrative expenses within its consolidated statement of operations, associated to the exclusion of lease related legal fees as initial direct costs, which are currently deferred within lease acquisition costs and recognized over the life of the lease. The Company does not expect any significant impact on its condensed consolidated statement of operations or condensed consolidated statement of cash flows. Additionally, the Company is in the process of evaluating the expanded disclosure requirements related to this ASU.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The amendments in ASU 2016-13 provide amended guidance for estimating credit losses on certain types of financial instruments based on expected losses and the timing of the recognition of such losses. Expanded disclosures related to the methods used to estimate the losses are also required. In connection with the loss of its emerging growth company status, this standard will be adopted for the annual period beginning December 27, 2021, and the first presentation of the application will be presented in the Company’s annual consolidated financial statements for fiscal year 2022 included within the Company’s 2022 Annual Report on Form 10-K. The application of ASU 2018-07 is not expected to have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

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2.REVENUE RECOGNITION

Nature of products and services

The Company recognizes 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 the Company’s three disaggregated revenue channels: Owned Digital Channels, In Store-Channel (Non-Digital component), and Marketplace Channel.

Owned Digital Channels encompasses the Company’s Pick-Up Channel, Native Delivery Channel, Outpost Channel, and purchases made in its In-Store Channel via digital scan-to-pay. Pick-Up Channel refers to sales to customers made for pick up at one of the Company’s restaurants through the sweetgreen website or mobile app. Native Delivery Channel refers to sales to customers for delivery made through the sweetgreen website or mobile app. Outpost Channel refers to sales to customers for delivery made through the sweetgreen website or mobile app to Outposts, which are the Company’s trademark offsite drop-off points at offices, residential buildings and hospitals.

In-Store Channel (Non-Digital component) refers to sales to customers who make in-store purchases in the Company’s restaurants, whether they pay by cash or credit card.

Marketplace Channel refers to sales to customers for delivery or pick-up made through third-party delivery marketplaces, including Caviar, DoorDash, Grubhub, Postmates, and Uber Eats.

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 revenues.

Gift Cards

The Company sells 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 condensed consolidated balance sheets. The revenues from gift cards are recognized when redeemed by customers. Because the Company does 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 the Company’s state of incorporation, which is Delaware. The state of Delaware requires escheatment after 5 years from issuance. The Company does not recognize breakage income because of its requirements to escheat unredeemed gift card balances.

Delivery

All of the Company’s locations offer a delivery option. Delivery services are fulfilled by third-party service providers whether delivery is ordered through the Company’s Native Delivery Channel or Marketplace Channel. With respect to Native Delivery sales, the Company controls the delivery services and recognizes revenue, including delivery revenue, when the delivery partner transfers food to the customer. For these sales, the Company receives payment directly from the customer at the time of sale. With respect to Marketplace Channel sales, the Company recognizes revenue, excluding delivery fees collected by the delivery partner as the Company does not control the delivery service, when control of the food is delivered to the end customer. The Company receives payment from the delivery partner subsequent to the transfer of food and the payment terms are short-term in nature. For all delivery sales, the Company is considered the principal and recognizes the revenue on a gross basis.

The following table presents the Company’s revenue for the thirteen and thirty-nine weeks ended September 25, 2022 and September 26, 2021 disaggregated by significant revenue channel:


	Thirteen weeks ended				Thirty-nine weeks ended
(dollar amounts in thousands)	September 25, 2022		September 26, 2021		September 25, 2022		September 26, 2021
Owned Digital Channels	$	49,329	$	41,087	$	143,966	$	114,629
In-Store Channel (Non-Digital component)	50,014		35,372		132,184		77,048
Marketplace Channel	24,683		19,385		75,385		51,771
Total Revenue	$	124,026	$	95,844	$	351,535	$	243,448

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Gift Cards

Gift card liability included in gift card and loyalty liability within the accompanying condensed consolidated balance sheet was as follows:


(dollar amounts in thousands)	As of September 25, 2022		As of December 26, 2021
Gift Card Liability	$	1,643	$	1,839

Revenue recognized from the redemption of gift cards that was included in gift card and loyalty liability at the beginning of the year was as follows:


	Thirteen weeks ended				Thirty-nine weeks ended
(dollar amounts in thousands)	September 25, 2022		September 26, 2021		September 25, 2022		September 26, 2021
Revenue recognized from gift card liability balance at the beginning of the year	$	35	$	30	$	353	$	209

sweetgreen Rewards

Changes in sweetgreen Rewards liability included in gift card and loyalty liability within the accompanying condensed consolidated balance sheet was as follows:


	Thirty-nine weeks ended
(dollar amounts in thousands)	September 25, 2022		September 26, 2021
sweetgreen Rewards liability, beginning balance	$	—	$	943
Revenue deferred	—		1,701
Revenue recognized	—		(2,644)
sweetgreen Rewards liability, ending balance	$	—	$	—

All the loyalty liability outstanding at the beginning of each year presented was recognized during each respective year. All rewards revenue related to performance obligations were satisfied as of September 25, 2022.

3.FAIR VALUE

The following tables present information about the Company’s financial liabilities measured at fair value on a recurring basis:


			Fair Value Measurements as of September 25, 2022								Fair Value Measurements as of December 26, 2021
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
(dollar amounts in thousands)
Contingent consideration	18,322		—		—		18,322		20,477		—		—		20,477
Total	$	18,322	$	—	$	—	$	18,322	$	20,477	$	—	$	—	$	20,477

The fair value of the contingent consideration was determined based on significant inputs not observable in the market.

In connection with the acquisition of Spyce on September 7, 2021, the former equity holders of Spyce may receive up to 714,285 additional shares of Class A Common Stock, calculated based on the initial offering price of the Company’s Class A common stock of $28.00 per share sold in the Company’s IPO (the “Reference Price”), contingent on the achievement of certain performance milestones between the closing date of the acquisition and June 30, 2026. See Note 6. Additionally, the former equityholders of Spyce may receive true-up payments in cash as follows: if (i) as of the second anniversary of the closing date of the acquisition, the 30-Day Volume-Weighted Average Price of the Company’s Class A common stock (“VWAP Price”) is less than the Reference Price, then the Company shall pay to each former equityholder of Spyce

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that has continually held its shares of the Company’s Class A common stock the delta between the Reference Price and the VWAP Price for the upfront portion of the purchase price and (ii) as of the date of the achievement of any of the three milestones, the VWAP Price as of such milestone achievement date is less than the Reference Price, then the Company shall pay to each former equityholder of Spyce that is eligible to receive a milestone payment the delta between the Reference Price and the VWAP Price for the contingent consideration associated with such milestone. The contingent consideration was valued using the Monte Carlo method. The analysis considered, among other items, the equity value, the contractual terms of the Spyce merger agreement, potential liquidity event scenarios (prior to the IPO), the Company’s credit adjusted discount rate, equity volatility, risk-free rate and the probability of milestone targets required for issuance of shares under the contingent consideration will be achieved.

The following table provides a roll forward of the aggregate fair values of the Company’s contingent consideration, for which fair value is determined using Level 3 inputs.


(dollar amounts in thousands)	Contingent Consideration
Balance—December 26, 2021	$	20,477
Change in fair value	(2,155)
Balance—September 25, 2022	$	18,322

The following non-financial instruments were measured at fair value, on a nonrecurring basis, as of and for the thirteen and thirty-nine weeks ended September 25, 2022 and September 26, 2021, reflecting certain property and equipment for which an impairment loss was recognized during the corresponding periods, see Note 1:

Fair Value Measurements as of September 25, 2022

Thirteen Weeks Ended September 25, 2022

Thirty-Nine Weeks Ended September 25, 2022

Total

Level 1

Level 2

Level 3

Impairment Losses

(dollar amounts in thousands)

Certain property and equipment, net

—

1,693

Fair Value Measurements as of September 26, 2021

Thirteen Weeks Ended September 26, 2021

Thirty-Nine Weeks Ended September 26, 2021

Total

Level 1

Level 2

Level 3

Impairment Losses

(dollar amounts in thousands)

Certain property and equipment, net

—

4,415

The fair value of the related property and equipment as of September 25, 2022 and September 26, 2021 was determined to be $0 and represents a Level 3 fair value measurement.

4.PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life. A summary of property and equipment is as follows:

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(dollar amounts in thousands)	As of September 25, 2022		As of December 26, 2021
Furniture and fixtures	$	23,682	$	26,168
Computers and other equipment	27,939		22,890
Kitchen equipment	65,296		47,911
Leasehold improvements	195,626		167,362
Assets not yet placed in service	28,915		21,981
Total property and equipment	341,458		286,312
Less: accumulated depreciation	(133,188)		(105,646)
Property and equipment, net	$	208,270	$	180,666

Depreciation expense for the thirteen weeks ended September 25, 2022 and September 26, 2021, was $9.9 million and $7.6 million, respectively.

Depreciation expense for the thirty-nine weeks ended September 25, 2022 and September 26, 2021, was $28.1 million and $21.1 million, respectively.

Loss on asset disposals for the thirteen weeks ended September 25, 2022 was less than $0.1 million. There were no loss on asset disposals for the thirteen weeks ended September 26, 2021.

Loss on asset disposals for the thirty-nine weeks ended September 25, 2022 and September 26, 2021 was less than $0.1 million and $0.1 million, respectively.

Based on the Company’s review of its long-lived assets for impairment, the Company recorded non-cash impairment charges of $1.7 million for the thirteen and thirty-nine weeks ended September 25, 2022. The Company recorded non-cash impairment charges of $4.4 million for the thirteen and thirty-nine weeks ended September 26, 2021. See Note 1.

As of September 25, 2022, the Company had 22 facilities under construction due to open during fiscal years 2022 and 2023. As of December 26, 2021, the Company had 13 facilities under construction, all of which have opened during fiscal year 2022. Depreciation commences after a store opens and the related assets are placed in service.

5.GOODWILL AND INTANGIBLE ASSETS, NET

During the thirty-nine weeks ended September 25, 2022, there were no changes in the carrying amount of goodwill of $36.0 million.

The following table presents the Company’s intangible assets, net balances:


(dollar amounts in thousands)	As of September 25, 2022		As of December 26, 2021
Internal use software	$	29,697	$	26,122
Developed technology	20,050		20,050
Total intangible assets	49,747		46,172
Accumulated amortization	(19,077)		(13,304)
Intangible assets, net	$	30,670	$	32,868

Developed technology intangible assets were recognized in conjunction with the Company’s acquisition of Spyce on September 7, 2021. The estimated useful life of developed technology is five years. As of September 25, 2022, developed technology has not been placed into service. See Note 6.

Amortization expense for intangible assets was $2.0 million and $1.7 million for the thirteen weeks ended September 25, 2022 and September 26, 2021, respectively.

Amortization expense for intangible assets was $5.8 million and $4.5 million for the thirty-nine weeks ended September 25, 2022 and September 26, 2021, respectively.

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Estimated amortization of internal use software for each of the next five years is as follows:


(dollar amounts in thousands)
2022	$	1,846
2023	5,488
2024	2,853
2025	433
2026	—

6.BUSINESS ACQUISITION

On September 7, 2021, the Company closed its acquisition of Spyce, a Boston-based restaurant company powered by automation technology. The Company acquired 100% of the stock of Spyce via a merger. The purpose of the acquisition is to allow the Company to serve its food with even better quality, consistency and efficiency in its restaurants via automation. Pursuant to the merger agreement, upon closing of the acquisition, the Company issued 1,843,493 shares of Class S stock (the “Class S Shares”) worth approximately $37.5 million, of which $6.8 million is considered post-business combination compensation expense, see Note 10 for details, and subject to certain vesting requirements of certain Spyce employees. In connection with the Company’s IPO, the Class S Shares converted into 1,316,763 shares of common stock pursuant to a formula based on the Reference Price, which such shares were then reclassified into shares of Class A common stock. Additionally, the Company paid off approximately $3.5 million of certain indebtedness and transaction expenses of Spyce. Furthermore, certain former equity holders of Spyce may receive up to an aggregate of 714,285 additional shares of Class A Common Stock contingent on the achievement of certain performance milestones between the closing date and June 30, 2026, as well as true-up cash payments as described in Note 3. The acquisition of Spyce was not significant pursuant to Rule 3-05 of Regulation S-X.

Allocation of the purchase price and the transaction costs is as follows (in thousands):


Fair value of assets acquired	As of September 7, 2021
Restricted cash	203
Property and equipment, net	707
Other assets	660
Developed technology	20,050
Goodwill	29,695
Total assets acquired	$	51,315

Fair value of liabilities assumed
Other liabilities	628
Total liabilities assumed	$	628
Total identifiable net assets	$	50,687

Fair value of consideration
Cash consideration, net of cash acquired	2,762
Closing third party expenses	781
Equity consideration	30,704
Contingent equity consideration	16,440
Total consideration	$	50,687

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Determining the fair value of the intangible assets acquired requires significant judgment, including the amount and timing of expected future cash flows, long-term growth rates and discount rates. The fair value of the intangibles assets was determined using a cost approach, which were based on the Company’s best estimate of recreating the developed technology acquired as part of the transaction. This includes estimates related to opportunity costs, developers profit, weighted average weight of return, and projected overhead. Use of different estimates and judgments could yield materially different results.

The Company’s consolidated financial statements for the thirteen and thirty-nine weeks ended September 25, 2022 reflect results of operations of the newly acquired business. The Company accounted for this acquisition under the acquisition method in accordance with ASC Topic 805, Business Combinations. The goodwill is attributable to the synergies the Company expects to achieve through leveraging the acquired technology to its existing restaurants and the workforce of Spyce. For tax purposes the acquisition was treated as a stock purchase, and as such any goodwill or other intangible assets recorded as a result of this transaction are not deductible for tax purposes.

Supplemental Pro Forma Information (unaudited)

The following unaudited pro forma summary presents consolidated information of the Company as if the business acquisition occurred on December 28, 2020.


	Thirteen weeks ended		Thirty-nine weeks ended
(dollar amounts in thousands)	September 26, 2021		September 26, 2021
Revenue	$	96,307	$	244,381
Net loss attributable to Sweetgreen, Inc.	$	(31,524)	$	(89,869)

The Company did not have any material, nonrecurring pro forma adjustments directly attributable to the business acquisition included in the reported pro forma revenue and earnings.

These pro forma amounts have been calculated by applying the Company’s accounting policies.

The unaudited pro forma supplemental information is based on estimates and assumptions, which the Company believes are reasonable and are not necessarily indicative of the results that have been realized had the acquisition been consolidated in the tables above as of December 28, 2020, nor are they indicative of results of operations that may occur in the future.

7.ACCRUED EXPENSES

Accrued expenses consist of the following:


(dollar amounts in thousands)	As of September 25, 2022		As of December 26, 2021
Rent deferrals	$	1,749	$	2,547
Accrued general and sales tax	2,874		3,115
Accrued delivery fee	907		778
Accrued settlements and legal fess	1,384		2,156
Other accrued expenses	9,629		7,742
Total accrued expenses	$	16,543	$	16,338

8.DEBT

Credit Facility—On December 14, 2020, the Company refinanced its previously existing 2017 Revolving Facility with EagleBank (as refinanced and as amended on September 29, 2021, the “2020 Credit Facility”). The 2020 Credit Facility allows the Company to borrow up to $35.0 million in the aggregate principal amount under the refinanced revolving facility and up to $10.0 million in the aggregate principal amount under a new delayed draw term loan facility. Under the 2020 Credit Facility, interest accrues on the outstanding loan

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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 of September 25, 2022 and December 26, 2021, the Company had no outstanding balance under the 2020 Credit Facility.

Under the 2020 Credit Facility, the Company is required to maintain certain levels of liquidity (defined as total cash and cash equivalents on hand plus the available amount under the revolving facility) which liquidity amount shall be no less than the trailing 90-day cash burn. The Company was in compliance with the applicable financial covenants as of September 25, 2022 and December 26, 2021.

The obligations under the 2020 Credit Facility are guaranteed by the Company’s existing and future material subsidiaries and secured by substantially all of the Company’s and subsidiaries guarantor’s assets. The agreement also restricts the Company’s ability, and the ability of the Company’s 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.

On May 9, 2022, the Company and Eagle Bank amended the 2020 Credit Facility to allow for borrowings for the issuance of Letters of Credit of up to $1.5 million. In connection therewith, the Company entered into a $950,000 irrevocable standby Letter of Credit with Eagle Bank with The Travelers Indemnity Company as the beneficiary in connection with the Company’s workers compensation insurance policy.

The Company had unamortized loan origination fees of less than $0.1 million and $0.1 million as of September 25, 2022 and December 26, 2021, respectively, which is included within the accompanying condensed consolidated balance sheet in other current assets. The Company recognized less than $0.1 million of interest expense for each of the thirteen and thirty-nine weeks ended September 25, 2022 and September 26, 2021, related to the amortization of loan origination fees.

9.COMMON STOCK

As of September 25, 2022 and December 26, 2021, the Company had reserved shares of common stock for issuance in connection with the following:


	As of September 25, 2022	As of December 26, 2021

Options outstanding under the 2009 Stock Plan, 2019 Equity Incentive Plan, Spyce Food Co. 2016 Stock Option Plan and Grant Plan and 2021 Equity Incentive Plan	13,410,616	13,773,414
Shares reserved for achievement of Spyce milestones	714,285	714,285
Shares reserved for employee stock purchase plan	3,000,000	3,000,000
RSUs and PSUs outstanding under the 2019 Equity Incentive Plan and 2021 Equity Incentive Plan	8,685,080	9,013,854


Shares available for future issuance under the 2019 Equity Incentive Plan and 2021 Equity Incentive Plan	11,157,109	12,159,177
Total reserved shares of common stock	36,967,090	38,660,730

10.STOCK-BASED COMPENSATION

2021 Equity Incentive Plan

In connection with the Company’s IPO, the Company adopted the 2021 Equity Incentive Plan (the “2021 Plan”), which allows for issuance of stock options (including incentive stock options and non-qualified stock options), RSUs, including performance-based awards, and other types of awards. The maximum number of shares of common stock that may be issued under the 2021 Plan is 35,166,753, which is the sum of (i) 11,500,000 new shares, plus (ii) an additional number of shares consisting of (a) shares that were available for the issuance of awards under any prior equity incentive plans in place (which shall include the Prior Stock Plans (as defined below) and the options to purchase certain shares of common stock, assumed by the Company, pursuant to the Spyce Food Co. 2016 Stock Option and Grant Plan, prior to the time the

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Company’s 2021 Plan became effective and (b) any shares of the Company’s common stock subject to outstanding stock options or other stock awards granted under the Prior Stock Plans that on or after the Company’s 2021 Plan became effective, terminate or expire prior to the exercise or settlement; are not issued because the award is settled in cash; are forfeited because of the failure to vest; or are reacquired or withheld (or not issued) to satisfy a tax withholding obligation or the purchase or exercise price. Options granted during, or prior to, the thirteen and thirty-nine weeks ended September 25, 2022 generally have vesting terms between twelve months and four years and have a contractual life of 10 years.

2009 Stock Plan and 2019 Equity Incentive Plan

Prior to the Company’s IPO, the Company granted stock options, RSUs and performance-based restricted stock awards (“PSUs”) to its employees, as well as nonemployees (including directors and others who provide substantial services to the Company) under the Company’s 2009 Stock Plan and 2019 Equity Incentive Plan (collectively, the “Prior Stock Plans”). Awards permitted to be granted under the Prior Stock Plans include incentive stock options to the Company’s employees and non-qualified stock options to the Company’s employees and non-employees, as well as stock appreciation rights, restricted stock awards, RSUs (including PSUs), and other forms of stock awards to the Company’s employees, directors and consultants and any of the Company’s affiliated employees and consultants.

Options granted during the thirteen and thirty-nine weeks ended September 25, 2022 and prior generally have vesting terms between one year and four years and have a contractual life of 10 years. No further stock awards will be granted under the Prior Stock Plans now that the 2021 Equity Incentive Plan is effective; however, awards outstanding under the Prior Stock Plans will continue to be governed by their existing terms.

Spyce Acquisition

In conjunction with the Spyce acquisition, the Company issued shares of Class S stock which converted to the Class A common stock upon the Company’s IPO. See Note 6. Shares of Class S stock that were issued to certain Spyce employees, and the corresponding shares of Class A common stock received by such employees in connection with the Company’s IPO, are subject to time-based service requirements and will vest on September 7, 2023, subject to vesting acceleration in full upon the occurrence of certain events. As the value is fixed, the grant date fair value of these shares represents the fair value of the shares on the acquisition date. For the thirteen and thirty-nine weeks ended September 25, 2022, the Company recognized stock-based compensation expense of $0.8 million and $2.5 million, respectively, related to the vested portion of such shares.

2021 Employee Stock Purchase Plan

In conjunction with the IPO, the Company’s board of directors adopted, and the Company’s stockholders approved the Company’s 2021 employee stock purchase plan (the “ESPP”). The Company’s ESPP authorizes the issuance of 3,000,000 shares of common stock under purchase rights granted to the Company’s employees or to the employees of any of its designated affiliates. The number of shares of the Company’s common stock reserved for issuance will automatically increase on January 1 of each year for a period of 10 years, beginning January 1, 2023, by the lesser of (i) 1% of the total number of shares of the Company’s common stock outstanding on December 31 of the immediately preceding year; and (ii) 4,300,000 shares, except before the date of any such increase, the Company’s board of directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii).

As of September 25, 2022, there had been no offering period or purchase period under the ESPP, and no such period will begin unless and until determined by the administrator.

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Stock Options

Certain amounts for employee stock option disclosures in prior years were reclassified to conform with current year presentation. The following table summarizes the Company’s stock option activity for the thirty-nine weeks ended September 25, 2022 and September 26, 2021:


(dollar amounts in thousands except per share amounts)	Number of Shares	Weighted Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value





Balance—December 26, 2021	13,773,414	$	6.87	7.42	$	337,269
Options granted	741,118	22.64
Options exercised	(819,454)	4.85
Options forfeited	(252,190)	13.44
Options expired	(32,272)	6.94
Balance—September 25, 2022	13,410,616	$	7.74	6.99	$	125,586

Exercisable—September 25, 2022	9,254,215	$	5.77	6.27	$	102,364

Vested and expected to vest—September 25, 2022	13,410,616	$	7.74	6.99	$	125,586


(dollar amounts in thousands except per share amounts)	Number of Shares	Weighted Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value





Balance—December 27, 2020	14,612,730	$	4.27	6.34	$	15,204
Options assumed	85,757	8.95
Options granted	5,102,710	11.20
Options exercised	(5,143,937)	4.95
Options forfeited	(527,434)	6.84
Options expired	(85,100)	5.43
Balance—September 26, 2021	14,044,726	$	6.92	7.29	$	114,172

Exercisable—September 26, 2021	4,615,134	$	4.33	4.83	$	42,619

Vested and expected to vest—September 26, 2021	14,044,726	$	6.92	7.29	$	114,172

The weighted-average fair value of options granted during the thirty-nine weeks ended September 25, 2022 and thirty-nine weeks ended September 26, 2021, was $10.18 and $4.76, respectively.

The fair value of each option granted has been estimated as of the date of the grant using the Black-Scholes option-pricing model. The Company has elected to account for forfeitures as they occur.

As of September 25, 2022, there was $20.9 million in unrecognized compensation expense related to unvested stock-based compensation arrangements and is expected to be recognized over a weighted average period 2.17 years.

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Restricted Stock Units and Performance Stock Units

Restricted stock units

The following table summarizes the Company’s RSU activity for the thirty-nine weeks ended September 25, 2022:


(dollar amounts in thousands except per share amounts)	Number of Shares	Weighted-Average Grant Date Fair Value
Balance—December 26, 2021	2,392,426	$	24.18
Granted	566,245	21.59
Released	(588,620)	22.15
Forfeited	(306,399)	26.06
Balance—September 25, 2022	2,063,652	$	23.77

There were no RSUs granted during the thirty-nine weeks ended September 26, 2021.

As of September 25, 2022, unrecognized compensation expense related to RSUs was $33.7 million and is expected to be recognized over a weighted average period of 1.73 years. The fair value of shares released as of the vesting date during the thirty-nine weeks ended September 25, 2022 was $11.6 million.

Performance stock units

In October 2021, the Company granted 2,100,000 PSUs to each founder (the “founder PSUs”) for a total of 6,300,000 PSUs, under the 2019 Equity Incentive Plan. The founder PSUs vest upon the satisfaction of a service condition and the achievement of certain stock price goals.

Subsequent to the Company’s IPO, the Company issued 321,428 PSUs to the Spyce founders (“Spyce PSUs”) based on three separate performance-based milestone targets. During the thirty-nine weeks ended September 25, 2022, the Company has not recorded any stock-based compensation expense related to the Spyce PSUs, as no expense will be recognized until the targets are probable of being met. Unrecognized compensation expense related to the Spyce PSUs was $9.8 million, which will be expensed if the performance-based milestones targets become probable of being met.

There were no additional PSU grants during the thirty-nine weeks ended September 25, 2022.

As of September 25, 2022 unrecognized compensation expense related to the founder PSUs was $69.6 million and is expected to recognized over a weighted average period of 2.23 years.

A summary of stock-based compensation expense recognized during the thirteen and thirty-nine weeks ended September 25, 2022 and September 26, 2021 is as follows:


	Thirteen weeks ended				Thirty-nine weeks ended
(dollar amounts in thousands)	September 25, 2022		September 26, 2021		September 25, 2022		September 26, 2021
Stock-options	$	2,771	$	3,008	$	7,870	$	6,104
Restricted stock units	5,782		—		27,958		—
Performance stock units	9,048		—		27,145		—
Total stock-based compensation	$	17,601	$	3,008	$	62,973	$	6,104

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11.INCOME TAXES

The Company’s entire pretax loss for the thirteen and thirty-nine weeks ended September 25, 2022 and September 26, 2021 was from its U.S domestic operations. The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items arising during interim periods. For the thirteen and thirty-nine weeks ended September 25, 2022 and September 26, 2021, there were no significant discrete items recorded and the Company recorded less than $0.1 million and no income tax expense, respectively.

On March 27, 2020, the CARES Act was signed into law. The CARES Act provides numerous tax provisions and other stimulus measures, including provisions, among others, addressing the carryback of NOLs for specific periods, refunds of alternative minimum tax credits, temporary modifications to the limitations placed on the tax deductibility of net interest expenses, and technical amendments for qualified improvement property (“QIP”). Additionally, the CARES Act, in efforts to enhance business’ liquidity, provides for refundable employee retention tax credits and the deferral of the employer-paid portion of social security taxes. The Company elected to defer the employer-paid portion of social security payroll taxes through December 27, 2020, of $5.0 million, of which $2.5 million was remitted during the fiscal year 2021, and the remaining $2.5 million is required to be remitted at the end of calendar year 2022. The remaining $2.5 million obligation as of September 25, 2022 is included within accrued payroll, within the accompanying condensed consolidated balance sheets.

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (“IRA”) into law. The IRA contains several revisions to the Internal Revenue Code, including a 15% corporate minimum income tax for entities with adjusted financial statement income of over $1.0 billion and a 1% excise tax on corporate stock repurchases in tax years beginning after December 31, 2022. While these tax law changes have no immediate effect and are not expected to have a material adverse effect on the Company’s results of operations going forward, the Company will continue to evaluate its impact as further information becomes available.

12.NET LOSS PER SHARE

During the thirteen and thirty-nine weeks ended September 25, 2022 and September 26, 2021, the rights, including the liquidation and dividend rights, of the holders of Class A and Class B common stock were identical, except with respect to voting. As the liquidation and dividend rights were identical, the undistributed earnings were allocated on a proportionate basis and the resulting net loss per share attributable to common stockholders were, therefore, the same for both Class A and Class B common stock on an individual or combined basis.

The following table sets forth the computation of net loss per common share:


	Thirteen weeks ended				Thirty-nine weeks ended
	September 25, 2022		September 26, 2021		September 25, 2022		September 26, 2021
(dollar amounts in thousands)
Numerator:
Net loss	$	(47,397)	$	(30,066)	$	(136,630)	$	(86,994)
Denominator:
Weighted-average common shares outstanding—basic and diluted	110,375,126		19,084,124		109,848,272		17,836,525
Earnings per share—basic and diluted	$	(0.43)	$	(1.58)	$	(1.24)	$	(4.88)

The Company’s potentially dilutive securities, which include preferred stock, time-based vesting restricted stock units, performance stock units, contingently issuable stock and options to purchase common stock, have been excluded from the computation of diluted net loss per share as the effect would be antidilutive. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share is the same. The Company excluded the following potential common shares,

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presented based on amounts outstanding at each period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:


	Thirteen weeks ended		Thirty-nine weeks ended
	September 25, 2022	September 26, 2021	September 25, 2022		September 26, 2021
Options to purchase common stock	13,410,616	14,117,593	13,410,616		14,117,593
Preferred stock	—	71,466,912	—	—	71,466,912
Time-based vesting restricted stock units	2,063,652	—	2,063,652		—
Performance stock units	6,621,428	—	6,621,428		—
Contingently issuable stock	714,285	—	714,285		—
Total common stock equivalents	22,809,981	85,584,505	22,809,981		85,584,505

13.RELATED-PARTY TRANSACTIONS

The Company’s founders and Chief Financial Officer each hold indirect minority passive interests in Luzzatto Opportunity Fund II, LLC, an entity which holds indirect equity interests in Welcome to the Dairy, LLC, which is the owner of the properties leased by the Company for the Company’s principal corporate headquarters. For the thirteen weeks ended September 25, 2022 and September 26, 2021, total payments to Welcome to the Dairy, LLC, totaled $0.9 million and $0.7 million, respectively. For the thirty-nine weeks ended September 25, 2022 and September 26, 2021, total payments to Welcome to the Dairy, LLC, totaled $4.1 million and $3.4 million, respectively.

14.COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases its office facilities, restaurant locations, and certain equipment under non-cancelable operating leases that expire on various dates. During the thirteen weeks ended September 25, 2022 and September 26, 2021, the Company recorded rent expense of $11.1 million and $9.9 million, respectively. During the thirty-nine weeks ended September 25, 2022 and September 26, 2021, the Company recorded rent expense of $32.5 million and $25.5 million, respectively.

Future minimum lease payments under non-cancelable operating leases subsequent to September 25, 2022 are as follows (in thousands):


(dollar amounts in thousands)	Total		2022		2023		2024		2025		2026		Thereafter
Operating Leases	$	444,031	$	11,619	$	52,022	$	54,389	$	53,833	$	52,576	$	219,592
Purchase obligations(1)	$	7,562	$	743	$	6,819	$	—	$	—	$	—	$	—

(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 the Company’s purchase obligations relate to amounts owed for supplies within its restaurants.

Legal Contingencies

The Company is subject to various claims, lawsuits, governmental investigations and administrative proceedings that arise in the ordinary course of business. The Company does not believe that the ultimate resolution of any of these matters will have a material effect on the Company’s financial position, results of operations, liquidity, or capital resources. However, an increase in the number of these claims, or one or more successful claims under which the Company incurs greater liabilities than the Company currently anticipates, could materially and adversely affect the Company’s business, financial position, results of operations, and cash flows.

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15.SUBSEQUENT EVENTS

The Company evaluated subsequent events through November 8, 2022, the date its accompanying condensed consolidated financial statements were available to be issued, and determined there are no events that require adjustment to or disclosure in these condensed consolidated financial statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 to Sweetgreen, 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 of September 25, 2022, we owned and operated 176 restaurants in 16 states and Washington, D.C.

Factors Affecting Our Business

Expanding Restaurant Footprint

Opening new restaurants is an important driver of our revenue growth. During the thirteen weeks ended September 25, 2022 and September 26, 2021, we had 10 and 11 Net New Restaurant Openings, respectively. During the thirty-nine weeks ended September 25, 2022 and September 26, 2021, we had 26 and 21 Net New Restaurant Openings, respectively. Our total count as of September 25, 2022 was 176 restaurants in 16 states and Washington, 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 new U.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 the location and timing of opening new restaurants, both in new and existing U.S. markets and in urban and suburban areas, with both high anticipated foot or vehicle traffic and proximity to workplaces, residences and other restaurant and retail businesses that support our multi-channel approach, including our Native Delivery, Marketplace Delivery and Outpost Channels.

Macroeconomic Conditions and the Impact of the COVID-19 Pandemic

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. 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. However, 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.

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 current macroeconomic environment or in the future. In particular, current and future macroeconomic conditions could cause additional menu price increases to negatively impact our Same Store Sales

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Growth. There can be no assurance that future cost increases, including as a result of inflation, can be offset by increased menu prices or that our current or future menu prices will be fully absorbed by our customers without any resulting change to their demand for our products.

In the thirteen weeks ended September 25, 2022, our revenue growth was negatively impacted in part by current macroeconomic conditions and softening consumer demand. In fiscal year 2022,we have seen increased variability in our customer traffic patterns, including as a result of employees returning to offices at a slower rate and at a lower frequency than anticipated as a result of many workplaces adopting remote or hybrid models. Additionally, as a result of inflation we have seen an increase in wage rates and costs of goods sold in the thirteen and thirty-nine weeks ended September 25, 2022, which has had a negative impact on our Restaurant Level Profit.

As a result of the factors described above, and as previously disclosed, during the thirteen weeks ended September 25, 2022, we implemented certain cost cutting measures, and may in the future have to implement additional cost cutting measures. Specifically, on August 8, 2022, we took a number of steps to manage operating expenses at our sweetgreen Support Center with a focus of achieving profitability on an Adjusted EBITDA basis (the “Plan”), which included workforce reductions affecting approximately 5% of employees at the sweetgreen Support Center, and a reduction of our real estate footprint by vacating the premises of the existing sweetgreen Support Center and moving to a smaller office space adjacent to its existing location. We incurred total pre-tax restructuring and related charges of approximately $11.1 million. This included a $9.8 million non-cash restructuring expense due to a reduction of our real estate footprint by vacating the premises of our existing sweetgreen Support Center and moving to a smaller office space adjacent to the existing location, of which $6.8 million related to abandonment of the long-lived assets associated with the sweetgreen Support Center and $3.0 million related to the future lease liability, offset by assumed sublease income. Additionally, we recognized expense of $0.6 million related to severance and related benefits from workforce reductions affecting approximately 5% of employees at our sweetgreen Support Center, $0.6 million of costs related to abandoning certain potential future restaurant sites in an effort to streamline our future new restaurant openings, and $0.1 million of other related expenses.

Seasonality

Our revenue fluctuates as a result of seasonal factors and weather conditions. 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 (generally the winter months, though inclement weather conditions may occur in certain markets at any time of the year) 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. Recently, as consumer behavior trends have changed, the seasonality in our business has been less predictable than in prior years and we have seen an increase and prolonged negative impact on our revenue around national holidays. These factors resulted in slower sales growth than anticipated during the thirteen weeks ended September 25, 2022.

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. Since the beginning of the COVID-19 pandemic, we have seen a significant increased percentage of sales through our Native Delivery 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 the Native Delivery, Outpost, and Marketplace 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 by operating these channels more efficiently, and on Outpost via similar negotiation and/or more efficient delivery from couriers.

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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 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						Thirty-nine weeks ended
(dollar amounts in thousands )	September 25, 2022			September 26, 2021			September 25, 2022			September 26, 2021
Net New Restaurant Openings	10			11			26			21
Average Unit Volume(1)	$	2,892		$	2,459		$	2,892		$	2,459
Same-Store Sales Change (%)(2)	6		%	43		%	17		%	21		%
Restaurant-Level Profit	$	19,823		$	13,134		$	56,169		$	28,060
Restaurant-Level Profit Margin (%)	16		%	14		%	16		%	12		%
Adjusted EBITDA	$	(6,793)		$	(14,085)		$	(30,698)		$	(48,928)
Adjusted EBITDA Margin (%)	(5)		%	(15)		%	(9)		%	(20)		%
Total Digital Revenue Percentage	60		%	63		%	62		%	68		%
Owned Digital Revenue Percentage	40		%	43		%	41		%	47		%

(1)Our results for the thirteen and thirty-nine weeks ended September 25, 2022 have been adjusted to reflect the temporary closures of one restaurant which was excluded from the Comparable Restaurant Base. This did not result in a material change.

(2)Our results for the thirteen and thirty-nine weeks ended September 25, 2022 have been adjusted to reflect the temporary closure of four restaurants. Without these adjustments, Same Store Sales Change would have been 5% and 17% for the thirteen and thirty-nine weeks ended September 26, 2022, respectively. Our results for the thirteen and thirty-nine weeks ended September 26, 2021 have been adjusted to reflect the temporary closures of 19 restaurants in fiscal year 2020 due to the COVID-19 pandemic and the temporary closures of 56 restaurants due to civil disturbances that occurred during one week in the second fiscal quarter of fiscal year 2020. Without these adjustments, Same Store Sales Change would have been 48% and 27% for the thirteen and thirty-nine weeks ended September 26, 2021, respectively.

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. For the thirteen and thirty-nine weeks ended September 25, 2022 one restaurant was excluded from the Comparable Restaurant Base. For the thirteen and thirty-nine weeks ended September 26, 2021 no restaurants were excluded from the Comparable Restaurant Base.

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;

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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. As a result of temporary closures during the thirteen and thirty-nine weeks ended September 25, 2022, our Same-Store Sales Change has been adjusted to reflect the temporary closures of four of our restaurants. Furthermore, as a result of 19 restaurants due to the COVID-19 pandemic during fiscal year 2020, Same-Store Sales Change has been adjusted for the thirteen and thirty-nine weeks ended September 26, 2021. Additionally, as a result of temporary closures of 56 restaurants due to civil disturbances that occurred during one week in the second fiscal quarter of fiscal year 2020, we excluded only one week from the calculation of Same-Store Sales Change for the thirty-nine weeks ended September 26, 2021. This is because excluding an entire fiscal month for these restaurants, which represented a significant portion of our restaurant fleet, would result in a Same-Store Sales Change figure that is not representative of our business as a whole. This financial 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

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) expense, amortization of cloud-based software implementation costs, restructuring costs and, in certain periods, impairment of long-lived assets and closed-store costs and restructuring charges. 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 Operations

Revenue

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, diversify and expand our menu, make 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,

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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 is Delaware. The state of Delaware 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.

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. Additionally, we have recently experienced an increase in freight related surcharges from our vendors as a result of increased inflation and higher gas prices. 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. Other factors that influence labor costs include each jurisdiction’s minimum wage, payroll tax legislation, inflation, the strength of the labor market for hourly employees, benefit costs, 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.

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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 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 the SEC, as well as higher expenses for general liability and director and officer insurance, investor relations, and professional services. As a percentage of revenue, we expect our general and administrative expenses to vary from period to period and decrease over time. Additionally, we implemented certain cost cutting measures in the thirteen weeks ended September 25, 2022, and may in the future have to implement additional cost cutting measures. See the subsection titled “—Factors Affecting Our Business—Macroeconomic Conditions and the Impact of the Covid-19 Pandemic” above for a description of the Plan we implemented in August 2022.

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.

Impairment of Long-Lived Assets and Closed-Store Costs

Impairment of long-lived assets includes impairment charges related to our long-lived assets, which include property and equipment. Closed-store costs include non-cash restaurant charges such as up-front expensing the net present value of unpaid rent remaining on the life of a lease offset by assumed sublease income.

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.

Restructuring Charges

Restructuring charges are expenses that are paid in connection with the reorganization of our operations. These costs primarily include non-cash expenses, due to a reduction of our real estate footprint by vacating the premises for our existing sweetgreen Support Center and moving to a smaller office space adjacent to its existing location, primarily related to abandonment of the long-lived assets associated with our sweetgreen Support Center and the future lease liability, offset by assumed sublease income. These costs also include severance and related benefits from workforce reductions affecting approximately 5% of employees at our sweetgreen Support Center, and costs related to abandoning certain potential future restaurant sites, which are a result of our efforts to streamline our future new restaurant openings, and other related expenses.

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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) Expense

Other (income) expense consists of changes in the fair value of our contingent consideration liability and changes in fair value in our preferred warrant 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 11 to our condensed consolidated financial statements included elsewhere in this Quarterly Report.

Results of Operations

Comparison of the thirteen and thirty-nine weeks ended September 25, 2022 and September 26, 2021

The following table summarizes our results of operations for the thirteen weeks ended September 25, 2022 and September 26, 2021:


	Thirteen weeks ended
(dollar amounts in thousands)	September 25, 2022		September 26, 2021		Dollar Change		Percentage Change
Revenue	$	124,026	$	95,844	$	28,182	29	%
Restaurant operating costs (exclusive of depreciation and amortization presented separately below):
Food, beverage, and packaging	34,474		26,701		7,773		29	%
Labor and related expenses	38,006		30,316		7,690		25	%
Occupancy and related expenses	17,188		14,053		3,135		22	%
Other restaurant operating costs	14,535		11,640		2,895		25	%
Total cost of restaurant operations	104,203		82,710		21,493		26	%
Operating expenses:
General and administrative	41,381		28,944		12,437		43	%
Depreciation and amortization	11,887		9,303		2,584		28	%
Pre-opening costs	3,061		2,789		272		10	%
Impairment of long-lived assets and closed-store costs	1,693		4,415		(2,722)		(62	%)
Loss on disposal of property and equipment	21		—		21		100	%
Restructuring charges	11,081		—		11,081		N/A
Total operating expenses	69,124		45,451		23,673		52	%
Loss from operations	(49,301)		(32,317)		(16,984)		53	%
Interest income	(1,644)		(78)		(1,566)		2008	%
Interest expense	23		23		—		—	%
Other (income) expense	(303)		(2,196)		1,893		(86	%)
Net loss before income taxes	(47,377)		(30,066)		(17,311)		58	%
Income tax expense	20		—		20		100	%
Net loss	$	(47,397)	$	(30,066)	$	(17,291)	58	%

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The following table summarizes our results of operations for the thirty-nine weeks ended September 25, 2022 and September 26, 2021:


	Thirty-nine weeks ended
(dollar amounts in thousands)	September 25, 2022		September 26, 2021		Dollar Change		Percentage Change
Revenue	$	351,535	$	243,448	$	108,087	44	%
Restaurant operating costs (exclusive of depreciation and amortization presented separately below):
Food, beverage, and packaging	95,477		67,125		28,352		42	%
Labor and related expenses	109,321		79,343		29,978		38	%
Occupancy and related expenses	47,815		35,919		11,896		33	%
Other restaurant operating costs	42,753		33,001		9,752		30	%
Total cost of restaurant operations	295,366		215,388		79,978		37	%
Operating expenses:
General and administrative	142,313		78,395		63,918		82	%
Depreciation and amortization	33,870		25,558		8,312		33	%
Pre-opening costs	8,093		6,256		1,837		29	%
Impairment of long-lived assets and closed-store costs	1,845		4,415		(2,570)		(58	%)
Loss on disposal of property and equipment	41		56		(15)		(27	%)
Restructuring charges	11,081		—		11,081		N/A
Total operating expenses	197,243		114,680		82,563		72	%
Loss from operations	(141,074)		(86,620)		(54,454)		63	%
Interest income	(2,406)		(299)		(2,107)		705	%
Interest expense	68		65		3		5	%
Other (income) expense	(2,166)		608		(2,774)		(456	%)
Net loss before income taxes	(136,570)		(86,994)		(49,576)		57	%
Income tax expense	60		—		60		100	%
Net loss	$	(136,630)	$	(86,994)	$	(49,516)	57	%

Revenue


	Thirteen weeks ended						Thirty-nine weeks ended
(dollar amounts in thousands)	September 25, 2022		September 26, 2021		Percentage Change		September 25, 2022		September 26, 2021		Percentage Change
Revenue	124,026		95,844		29	%	351,535		243,448		44	%
Average Unit Volume	2,892		2,459		18	%	2,892		2,459		18	%
Same-Store Sales Change	6	%	43	%	(37	%)	17	%	21	%	(4	%)

The increase in revenue for the thirteen weeks ended September 25, 2022 was primarily due to an increase of $22.7 million due to 47 Net New Restaurant Openings during or subsequent to the thirteen weeks ended September 26, 2021. The remaining increase was due to an increase in Comparable Restaurant Base revenue of $5.5 million, resulting in a positive Same-Store Sales Change of 6%, consisting of a 6% benefit from menu price increases that were implemented subsequent to the thirteen weeks ended September 26, 2021.

The increase in revenue for the thirty-nine weeks ended September 25, 2022 was primarily due to an increase of $68.3 million due to 57 Net New Restaurant Openings during or subsequent to the thirty-nine weeks ended September 26, 2021. The remaining increase was due to an increase in Comparable Restaurant Base revenue of $39.8 million, resulting in a positive Same-Store Sales Change of 17%, consisting of a 10% increase from transactions and a 7% benefit from menu price increases that were implemented subsequent to the thirty-nine

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weeks ended September 26, 2021. The increase in transactions is mostly related to recovery from the impact of the COVID-19 pandemic compared to the thirty-nine weeks ended September 26, 2021.

Restaurant Operating Costs

Food, Beverage, and Packaging


	Thirteen weeks ended						Thirty-nine weeks ended
(dollar amounts in thousands)	September 25, 2022		September 26, 2021		Percentage Change		September 25, 2022		September 26, 2021		Percentage Change
Food, beverage, and packaging	34,474		26,701		29	%	95,477		67,125		42	%
As a percentage of total revenue	28	%	28	%	—	%	27	%	28	%	(1	%)

The increase in food, beverage, and packaging costs for the thirteen weeks ended September 25, 2022 was primarily due to a $7.0 million increase in food and beverage costs, a $0.7 million increase in packaging costs and a $0.1 million increase in freight and gas surcharges associated with deliveries from our distribution partners. This was primarily due to the 47 Net New Restaurant Openings during or subsequent to the thirteen weeks ended September 26, 2021.

The increase in food, beverage, and packaging costs for the thirty-nine weeks ended September 25, 2022 was primarily due to a $26.2 million increase in food and beverage costs, a $2.0 million increase in packaging costs and a $0.2 million increase in freight and gas surcharges associated with deliveries from our distribution partners. This was primarily due to the 57 Net New Restaurant Openings during or subsequent to the thirty-nine weeks ended September 26, 2021.

As a percentage of revenue, food, beverage, and packaging costs for the thirteen weeks ended September 25, 2022 was flat compared to the thirteen weeks ended September 26, 2021 due to menu pricing increases described above, offset by continued inflationary pressures and higher freight-related surcharges.

As a percentage of revenue food, beverage, and packaging costs for the thirty-nine weeks ended September 25, 2022 decreased due to greater sales leverage associated with recovery from the COVID-19 pandemic compared to the thirty-nine weeks ended September 26, 2021 and the impact of menu pricing increases described above, as well as the termination of the sweetgreen rewards program, which occurred in the second quarter of fiscal year 2021, partially offset by continued inflationary pressures and higher freight-related surcharges.

Labor and Related Expenses


	Thirteen weeks ended						Thirty-nine weeks ended
(dollar amounts in thousands)	September 25, 2022		September 26, 2021		Percentage Change		September 25, 2022		September 26, 2021		Percentage Change
Labor and related expenses	38,006		30,316		25	%	109,321		79,343		38	%
As a percentage of total revenue	31	%	32	%	(1	%)	31	%	33	%	(2	%)

The increase in labor and related expenses for the thirteen weeks ended September 25, 2022 was primarily due to the 47 Net New Restaurant Openings during or subsequent to the thirteen weeks ended September 26, 2021. The increase was also due to an increase in staffing expenses across all restaurant locations, primarily related to an increase in prevailing wage rates in many of our markets as a result of continued wage rate inflation in the industry.

The increase in labor and related expenses for the thirty-nine weeks ended September 25, 2022 was primarily due to the 57 Net New Restaurant Openings during or subsequent to the thirty-nine weeks ended September 26, 2021. The increase was also due to an increase in staffing expenses across all restaurant locations, primarily related to an increase in prevailing wage rates in many of our markets as a result of continued wage rate inflation in the industry and an increase in bonus expense, including a non-recurring retention bonus paid during the first quarter of fiscal year 2022, as we focus on employee retention.

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As a percentage of revenue, the decrease in labor and related expenses for the thirteen weeks ended September 25, 2022 was primarily due to the impact of menu price increases, described above, and simplification of our operating model, partially offset by an increase in prevailing wage rates as a result of continued wage rate inflation in the industry.

As a percentage of revenue, the decrease in labor and related expenses for the thirty-nine weeks ended September 25, 2022 was primarily due to greater sales leverage associated with the recovery from the impact of the COVID-19 pandemic, the impact of menu price increases, described above, and simplification of our operating model, partially offset by an increase in prevailing wage rates as a result of continued wage rate inflation in the industry.

Occupancy and Related Expenses


	Thirteen weeks ended						Thirty-nine weeks ended
(dollar amounts in thousands)	September 25, 2022		September 26, 2021		Percentage Change		September 25, 2022		September 26, 2021		Percentage Change
Occupancy and related expenses	17,188		14,053		22	%	47,815		35,919		33	%
As a percentage of total revenue	14	%	15	%	(1	%)	14	%	15	%	(1	%)

The increase in occupancy and related expenses for the thirteen weeks ended September 25, 2022 was primarily due to the 47 Net New Restaurant Openings during or subsequent to the thirteen weeks ended September 26, 2021. Further, the additional increase was due to higher COVID-19 related rent abatement received for multiple restaurant locations during the thirteen weeks ended September 26, 2021 compared to the thirteen weeks ended September 25, 2022.

The increase in occupancy and related expenses for the thirty-nine weeks ended September 25, 2022 was primarily due to the 57 Net New Restaurant Openings during or subsequent to the thirty-nine weeks ended September 26, 2021. Further, the additional increase was due to higher COVID-19 related rent abatement received for multiple restaurant locations during the thirty-nine weeks ended September 26, 2021 compared to the thirty-nine weeks ended September 25, 2022.

As a percentage of revenue, the decrease in occupancy and related expenses for the thirteen weeks ended September 25, 2022 was primarily due to the impact of menu price increases, described above, partially offset by the impact of the rent abatement received for multiple restaurant locations during the thirteen weeks ended September 26, 2021.

As a percentage of revenue, the decrease in occupancy and related expenses for the thirty-nine weeks ended September 25, 2022 was primarily due to greater sales leverage associated with recovery from the impact of the COVID-19 pandemic compared to the thirty-nine weeks ended September 26, 2021 and the impact of menu price increases, described above, partially offset by the impact of the rent abatement received for multiple restaurant locations during the thirty-nine weeks ended September 26, 2021.

Other Restaurant Operating Costs


	Thirteen weeks ended					Thirty-nine weeks ended
(dollar amounts in thousands)	September 25, 2022		September 26, 2021		Percentage Change	September 25, 2022		September 26, 2021		Percentage Change
Other restaurant operating costs	14,535		11,640		25%	42,753		33,001		30%
As a percentage of total revenue	12	%	12	%	—%	12	%	14	%	(2)%

The increase in other restaurant operating costs for the thirteen weeks ended September 25, 2022 was primarily due to a $1.2 million increase in delivery fees from the growth in transaction volume from our Native Delivery, Outpost, and Marketplace Channels, a $0.8 million increase in kitchen, cleaning and related supplies to support the increase in restaurants described above, and a $0.5 million increase in credit card and online related processing fees, related to the increases in revenue. The remaining increase is attributable to an increase in in-store marketing and office systems.

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The increase in other restaurant operating costs for the thirty-nine weeks ended September 25, 2022 was primarily due to a $3.4 million increase in delivery fees from the growth in transaction volume from our Native Delivery, Outpost, and Marketplace Channels, a $2.8 million increase in kitchen, cleaning and related supplies to support the increase in restaurants described above, a $2.1 million increase in credit card and online related processing fees, related to the increases in revenue, a $0.7 million increase in office systems, to assist with our growth, and $0.4 million increase in paid advertising. The remaining increase is attributable to an increase in other store expenses, including licenses and permits, security and signage.

As a percentage of revenue, other restaurant operating costs for the thirteen weeks ended September 25, 2022 were flat compared to the thirteen weeks ended September 26, 2021 due to the impact of menu price increases, offset by inflationary pressures and the increases described above.

As a percentage of revenue, other restaurant operating costs for the thirty-nine weeks ended September 25, 2022 decreased compared to the thirty-nine weeks ended September 26, 2021 due to greater sales leverage associated with recovery from the impact of the COVID-19 pandemic and the impact of menu price increases, partially offset by continued inflationary pressures and the increases described above.

Operating Expenses

General and Administrative


	Thirteen weeks ended						Thirty-nine weeks ended
(dollar amounts in thousands)	September 25, 2022		September 26, 2021		Percentage Change		September 25, 2022		September 26, 2021		Percentage Change
General and administrative	41,381		28,944		43	%	142,313		78,395		82	%
As a percentage of total revenue	33	%	30	%	3	%	40	%	32	%	8	%

The increase in general and administrative expenses for the thirteen weeks ended September 25, 2022 was primarily due to a $14.6 million increase in stock-based compensation expense, primarily related to restricted stock units and performance-based restricted stock units issued prior to our initial public offering (“IPO”). We incurred increased expenses of approximately $1.2 million as we transitioned to operating as a public company, consisting of a $0.9 million increase in directors and officers liability insurance cost, a $0.2 million increase in public company office systems and a $0.1 million increase in accounting-related fees. Included within public company office systems is $0.1 million of expense related to the amortization of costs associated with the implementation of our cloud computing arrangements in relation to our new ERP, which was implemented during the thirteen weeks ended September 25, 2022 . Additionally, we had a $0.6 million increase in costs related to office systems, as we continue to focus on growth and scalability. Additionally, we had a $0.3 million increase of expenses related to our investment in Spyce (see Note 6 to our condensed consolidated financial statements included elsewhere in this Quarterly Report) primarily related to a $1.6 million increase in research and development costs, partially offset by a $1.3 million decrease in non-recurring acquisition related costs. These costs were partially offset by a $3.3 million decrease in management salaries and benefits, including bonus, a $0.8 million decrease in operational consulting costs, and a $0.1 million decrease in other general and administrative costs.

The increase in general and administrative expenses for the thirty-nine weeks ended September 25, 2022 was primarily due to a $56.9 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 $4.2 million as we transitioned to operating as a public company, consisting of a $2.8 million increase in directors and officers liability insurance cost, a $1.0 million increase in accounting-related fees and a $0.4 million increase in public company office systems. Included within public company office systems is $0.1 million of expense related to the amortization of costs associated with the implementation of our cloud computing arrangements in relation to our new ERP, which was implemented during the thirty-nine weeks ended September 25, 2022. Additionally, we had a $3.8 million increase 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 $4.8 million is related to an increase in research and development, partially offset by a $1.0 million decrease in non-recurring acquisition related costs. We had a $1.8 million increase in office systems, as we continue to focus on growth and scalability, a $1.5 million increase in rent, a $1.2 million increase in marketing and advertising, a $0.9 million increase in travel and related expenses as we continue to open new stores, and $1.3 million increase in other general and administrative costs. These costs were partially offset by a $6.0 million decrease in management

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salaries and benefits, including bonus for employees at the sweetgreen Support Center and a $1.7 million decrease in operational consulting costs.

As a percentage of revenue, the increase in general and administrative expenses for the thirty-nine weeks ended September 25, 2022 was primarily due to the increases noted above, partially offset by the increase in revenue.

Depreciation and Amortization


	Thirteen weeks ended						Thirty-nine weeks ended
(dollar amounts in thousands)	September 25, 2022		September 26, 2021		Percentage Change		September 25, 2022		September 26, 2021		Percentage Change
Depreciation and amortization	11,887		9,303		28	%	33,870		25,558		33	%
As a percentage of total revenue	10	%	10	%	—	%	10	%	10	%	—	%

The increase in depreciation and amortization for the thirteen weeks ended September 25, 2022 was primarily due to the 47 Net New Restaurant Openings during or subsequent to the thirteen weeks ended September 26, 2021.

The increase in depreciation and amortization for the thirty-nine weeks ended September 25, 2022 was primarily due to the 57 Net New Restaurant Openings during or subsequent to the thirty-nine weeks ended September 26, 2021.

As a percentage of revenue, depreciation and amortization remained flat for the thirteen and thirty-nine weeks ended September 25, 2022, which was primarily due to comparatively higher revenue in the current period, offset by the increases noted above.

Pre-Opening Costs


	Thirteen weeks ended					Thirty-nine weeks ended
(dollar amounts in thousands)	September 25, 2022		September 26, 2021		Percentage Change	September 25, 2022		September 26, 2021		Percentage Change
Pre-opening costs	3,061		2,789		10%	8,093		6,256		29%
As a percentage of total revenue	2	%	3	%	(1%)	2	%	3	%	(1%)

The increase in pre-opening costs for the thirteen weeks ended September 25, 2022 was due to the timing of openings in the period and acceleration of restaurant openings anticipated in fiscal year 2023.

The increase in pre-opening costs for the thirty-nine weeks ended September 25, 2022 was primarily due to an increase from 26 Net New Restaurants in the thirty-nine weeks ended September 25, 2022 compared to 21 Net New Restaurant Openings in the thirty-nine weeks ended September 26, 2021, as well as the timing of such openings.

As a percentage of revenue, the decrease in pre-opening costs in the thirteen and thirty-nine weeks ended September 25, 2022 compared to the thirteen and thirty-nine weeks ended September 26, 2021 was due to comparatively higher revenue in the current period, partially offset by the increases noted above.

Impairment of Long-Lived Assets and Closed-Store Costs


	Thirteen weeks ended					Thirty-nine weeks ended
(dollar amounts in thousands)	September 25, 2022		September 26, 2021		Percentage Change	September 25, 2022		September 26, 2021		Percentage Change
Impairment of long-lived assets and closed-store costs	1,693		4,415		(62%)	1,845		4,415		(58%)
As a percentage of total revenue	1	%	5	%	(4%)	1	%	2	%	(1%)

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During the thirteen and thirty-nine weeks ended September 25, 2022, we recorded a non-cash impairment charge of $1.7 million related to the property and equipment at one of our restaurants. For the thirty-nine weeks ended September 25, 2022, we also recorded a non-cash closed-store cost of $0.2 million associated with our second Spyce location. During the thirteen weeks and thirty-nine weeks ended September 26, 2021, we recorded a non-cash impairment charge of $4.4 million, related to the property and equipment at certain of our stores, as well as the two stores operated by Spyce.

Loss on Disposal of Property and Equipment


	Thirteen weeks ended						Thirty-nine weeks ended
(dollar amounts in thousands)	September 25, 2022		September 26, 2021		Percentage Change		September 25, 2022		September 26, 2021		Percentage Change
Loss on disposal of property and equipment	21		—		—	%	41		56		(27	%)
As a percentage of total revenue	—	%	—	%	—	%	—	%	—	%	—	%

The increase in loss on disposal of property and equipment was due to an increase in furniture, equipment and fixture replacements at multiple restaurants for both the thirteen and thirty-nine weeks ended September 25, 2022.

Restructuring Charges


	Thirteen weeks ended						Thirty-nine weeks ended
(dollar amounts in thousands)	September 25, 2022		September 26, 2021		Percentage Change		September 25, 2022		September 26, 2021		Percentage Change
Restructuring charges	11,081		—		—	%	11,081		—		—	%
As a percentage of total revenue	9	%	—	%	9	%	3	%	—	%	3	%

Restructuring charges are expenses that are paid in connection with reorganization of our operations, and are considered a type of exit activity in accordance with ASC 420. For the thirteen and thirty-nine weeks ended September 25, 2022, we incurred total pre-tax restructuring and related charges of approximately $11.1 million. This included a $9.8 million non-cash restructuring expense, due to a reduction of our real estate footprint by vacating the premises of our existing sweetgreen Support Center and moving to a smaller office space adjacent to the existing location, of which $6.8 million related to abandonment of the long-lived assets associated with our sweetgreen Support Center and $3.0 million related to the future lease liability, offset by assumed sublease income. Additionally, we recognized expense of $0.6 million related to severance and related benefits from workforce reductions affecting approximately 5% of employees at our sweetgreen Support Center, $0.6 million of costs related to abandoning certain potential future restaurant sites in an effort to streamline our future new restaurant openings, and $0.1 million of other related expenses.

Interest Income and Interest Expense


	Thirteen weeks ended								Thirty-nine weeks ended
(dollar amounts in thousands)	September 25, 2022			September 26, 2021			Percentage Change		September 25, 2022			September 26, 2021			Percentage Change
Interest income	(1,644)			(78)			2008	%	(2,406)			(299)			705	%
Interest expense	23			23			—	%	68			65			5	%
Total interest income, net	$	(1,621)		$	(55)		2847	%	$	(2,338)		$	(234)		899	%
As a percentage of total revenue	—		%	—		%	—	%	—		%	—		%	—	%

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The increase in interest income, net, was primarily due to higher interest rates on our money market cash accounts during both the thirteen and thirty-nine weeks ended September 25, 2022, as well as higher average cash balances.

Other (Income) Expense


	Thirteen weeks ended						Thirty-nine weeks ended
(dollar amounts in thousands)	September 25, 2022		September 26, 2021		Percentage Change		September 25, 2022		September 26, 2021		Percentage Change
Other (income) expense	(303)		(2,196)		(86	%)	(2,166)		608		(456	%)
As a percentage of total revenue	—	%	(2)	%	2	%	(1)	%	—	%	(1	%)

The change in other income for both the thirteen and thirty-nine weeks ended September 25, 2022 was 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. The change in other (income) expense for both the thirteen and thirty-nine weeks ended September 26, 2021 was due to a change in the fair value of our preferred warrant liability.

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, closed-store costs and restructuring charges. 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, amortization of cloud-based software implementation costs, and other (income) expense, and, in certain periods, impairment of long-lived assets, closed-store costs and restructuring charges. Adjusted EBITDA Margin is Adjusted EBITDA as a percentage of revenue.

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:

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•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; ERP implementation and related costs; certain other expenses; and, in certain periods, impairment of long-lived assets and closed-store costs and restructuring charges; 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 ended						Thirty-nine weeks ended
(dollar amounts in thousands)	September 25, 2022			September 26, 2021			September 25, 2022			September 26, 2021
Loss from operations	$	(49,301)		$	(32,317)		$	(141,074)		$	(86,620)
Add back:
General and administrative	41,381			28,944			142,313			78,395
Depreciation and amortization	11,887			9,303			33,870			25,558
Pre-opening costs	3,061			2,789			8,093			6,256
Impairment of long-lived assets and closed-store costs	1,693			4,415			1,845			4,415
Loss on disposal of property and equipment(1)	21			—			41			56
Restructuring charges(2)	11,081			—			11,081			—
Restaurant-Level Profit	$	19,823		$	13,134		$	56,169		$	28,060
Loss from operations margin	(40)		%	(34)		%	(40)		%	(36)		%
Restaurant-Level Profit Margin	16		%	14		%	16		%	12		%

__________

(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.

(2)Restructuring charges are expenses that are paid in connection with reorganization of our operations. These costs primarily include a non-cash impairment and closed-store cost, due to a reduction of our real estate footprint by vacating the premises of our existing sweetgreen Support Center and moving to a smaller office space adjacent to its existing location, expenses from workforce reductions affecting approximately 5% of employees at our sweetgreen Support Center, and contract termination costs, related to streamlining our future new restaurant openings.

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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 ended						Thirty-nine weeks ended
(dollar amounts in thousands)	September 25, 2022			September 26, 2021			September 25, 2022			September 26, 2021
Net loss	$	(47,397)		$	(30,066)		$	(136,630)		$	(86,994)
Non-GAAP adjustments:
Income tax expense	20			—			60			—
Interest income	(1,644)			(78)			(2,406)			(299)
Interest expense	23			23			68			65
Depreciation and amortization	11,887			9,303			33,870			25,558
Stock-based compensation(1)	17,601			3,008			62,973			6,104
Loss on disposal of property and equipment(2)	21			—			41			56
Impairment of long-lived assets and closed-store costs(3)	1,693			4,415			1,845			4,415
Other expense/(income)(4)	(303)			(2,196)			(2,166)			608
Spyce acquisition costs(5)	161			1,506			502			1,559
Restructuring charges(6)	11,081			—			11,081			—
ERP implementation and related costs(7)	64			—			64			—
Adjusted EBITDA	$	(6,793)		$	(14,085)		$	(30,698)		$	(48,928)
Net loss margin	(38)		%	(31)		%	(39)		%	(36)		%
Adjusted EBITDA Margin	(5)		%	(15)		%	(9)		%	(20)		%

__________

(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)Includes costs related to impairment of long-lived assets and store closures.

(4)Other expense/(income) includes the change in fair value of the contingent consideration and the change in fair value of the warrant liability. See Notes 1 and 3 to our condensed consolidated financial statements included elsewhere in this Quarterly Report.

(5)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.

(6)Restructuring charges are expenses that are paid in connection with reorganization of our operations. These costs primarily included non-cash expenses related to reducing our real estate footprint by vacating the premises of our existing sweetgreen Support Center and moving to a smaller office space adjacent to the existing location, of which $6.8 million related to abandonment of the long-lived assets associated with our sweetgreen Support Center and $3.0 million related to the future lease liability, offset by assumed sublease income. Additionally, we recognized expense of $0.6 million related to severance and related benefits from workforce reductions affecting approximately 5% of employees at our sweetgreen Support Center, $0.6 million of costs related to abandoning certain potential future restaurant sites, in an effort to streamline our future new restaurant openings, and $0.1 million of other related expenses.

(7)Represents the amortization costs associated to the implementation from our cloud computing arrangements in relation to our new ERP.

Liquidity and Capital Resources

Sources 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, in November 2021, we completed our IPO, from 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 of September 25, 2022 and December 26, 2021, we had $381.0 million and $472.0 million in cash and cash equivalents, respectively. As of September 25, 2022, we had a $35.0 million revolving debt facility with EagleBank, of which we had access to $34.1 million after entering into a $950,000 irrevocable standby Letter of Credit under the facility on May 9, 2022. As of September 25, 2022, there have been no draws on the revolving facility. 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

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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 team member and customer experience in our restaurants, research and development costs, marketing-related costs, 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:


(amounts in thousands)	Total		2022		2023		2024		2025		2026		Thereafter
Operating leases	$	444,031	$	11,619	$	52,022	$	54,389	$	53,833	$	52,576	$	219,592
Purchase obligations(1)	$	743	$	743	$	—	$	—	$	—	$	—	$	—

(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

On December 14, 2020, we refinanced our previously existing 2017 Revolving Facility with EagleBank (as refinanced and as amended on September 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 on December 14, 2021 and which was never drawn on. The refinanced revolving facility matures on December 14, 2022, and the term loan facility matures on December 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 of September 25, 2022 and December 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 of September 25, 2022 and December 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.

On September 29, 2021, we and EagleBank amended the 2020 Credit Facility to, among other things, exclude acquired Spyce intellectual property and assets from the EagleBank collateral package, permit the our dual-class capital structure, and enhance our 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 on December 14, 2022, and the term loan facility matures on December 15, 2025. However, if we incur 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

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debt or unsecured indebtedness, as applicable. The amendment did not change any financial covenant requirements.

On May 9, 2022, we and EagleBank amended the 2020 Credit Facility to allow for borrowings for the issuance of Letters of Credit of up to $1.5 million. In connection therewith, we entered into a $950,000 irrevocable standby Letter of Credit with Eagle Bank with The Travelers Indemnity Company as the beneficiary in connection with our workers compensation insurance policy.

Cash Flows

The following table summarizes our cash flows for the periods indicated:


(amounts in thousands)	Thirty-nine weeks ended September 25, 2022		Thirty-nine weeks ended September 26, 2021
Net cash used in operating activities	(24,081)		(36,215)
Net cash used in investing activities	(70,995)		(69,746)
Net cash provided by financing activities	3,978		140,555
Net increase (decrease) in cash and cash equivalents and restricted cash	$	(91,098)	$	34,594

Operating Activities

For the thirty-nine weeks ended September 25, 2022, cash used in operating activities decreased $12.1 million compared to the thirty-nine weeks ended September 26, 2021. The decrease was primarily due to a $20.2 million reduction in loss after excluding non-cash items, partially offset by the impact of unfavorable working capital fluctuations of $8.1 million.

The unfavorable working capital fluctuations were primarily due to a $17.9 million increase in cash outflow related to the timing of accrued payroll and benefits, timing of rent payments previously deferred as part of COVID negotiations with landlords, timing of payment of legal settlements, 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 thirty-nine weeks ended September 25, 2022, cash used in investing activities increased $1.2 million compared to the thirty-nine weeks ended September 26, 2021 primarily due to a $5.9 million increase in the purchases of property and equipment, due to an increase in new restaurants and a $0.5 million increase in security deposits and lease acquisition costs paid. The increase was offset by a $3.3 million decrease related to cash outflow related to our acquisition of Spyce in the prior year and a $1.9 million decrease in purchases of intangible assets.

Financing Activities

For the thirty-nine weeks ended September 25, 2022, cash provided by financing activities decreased $136.6 million compared to the thirty-nine weeks ended September 26, 2021. This was primarily due to proceeds received from preferred stock issuances, net of issuance costs, of $113.8 million and proceeds received from the repayment of previously issued related party loans of $5.2 million, during the thirty-nine weeks ended September 26, 2021. In addition, proceeds received from stock option exercises decreased by $21.4 million, partially offset by a decrease in deferred offering costs paid of $(3.8) million.

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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.

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 currently 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.

Based on the aggregate worldwide market value of our voting and non-voting common equity held by our non-affiliates as of June 26, 2022, pursuant to Rule 12b-2 of the Exchange Act, we will lose our emerging growth company status on December 25, 2022, at which point, we will qualify as a large accelerated filer and therefore will not be able to take advantage of these exemptions.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks in the ordinary course of business. The primary risks we face are commodity price risks, interest rate risk, and the effects of inflation. Except as disclosed below, there have been no material changes to our exposure to market risks as described in Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended December 26, 2021.

Commodity Price Risks

Due to the recent pace of inflation and other global supply chain risks, including extreme weather conditions, suppliers and distributors have, and could continue to, attempt to renegotiate our existing contracts to increase prices, as well as assess certain fuel surcharges. These changes could have a negative impact on our commodity prices. For example, in the fourth quarter of fiscal year 2022, as a result of extreme weather conditions, we are anticipating supply chain disruptions for key ingredients, such as romaine, arugula and tomatoes, which may result in higher prices for those products or result in temporarily discontinuing those products in certain geographic markets. We continue to assess the current environment, work with our suppliers and distributors and create certain contingency plans to mitigate any negative impact.

Macroeconomic Risks and the Impact of the COVID-19 Pandemic

Current macroeconomic conditions, such as inflation and increasing interest rates, increase the risk of an economic downturn. These macroeconomic conditions also negatively impact consumer discretionary spend and coupled with slower than expected return to office during and following the COVID-19 pandemic, including as a result of many workplaces adopting remote or hybrid models, led to our revenue growth slowing in the thirteen weeks ended September 25, 2022 (and much of such revenue regrowth was driven by a price increase taken in the first quarter of fiscal year 2022). Additionally, as a result of continued inflation, we have seen an increase in wage rates and costs of goods sold in the thirteen weeks and thirty-nine weeks ended September 25, 2022, which has had a negative impact on our Restaurant Level Profit. In order to mitigate these risks, we have implemented and may in the future have to implement additional cost cutting measures, as described above in “Factors Affecting our Business”.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

There were no changes to our internal control over financial reporting that occurred during the fiscal quarter ended September 25, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are subject to various claims, lawsuits, governmental investigations, and administrative proceedings that arise in the ordinary course of business. We do not believe that the ultimate resolution of any of these matters will have a material effect on our financial position, results of operations, liquidity, or capital resources. However, an increase in the number of these claims, or one or more successful claims under which we incur greater liabilities than we currently anticipate, could materially and adversely affect our business, financial position, results of operations, and cash flows.

ITEM 1A.RISK FACTORS

Except as described below, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 26, 2021, and in our Quarterly Report on Form 10-Q for the fiscal quarter ended June 26, 2022.

Risks Related to Our Business, Our Brand and Our Industry

We may not persuade customers of the benefits of paying our prices for higher-quality food.

Our success depends in large part on our ability to persuade customers that food made with higher-quality, locally sourced ingredients is worth the prices they will pay at our restaurants relative to prices offered by some of our competitors. We may not successfully educate customers about the quality of our food, and customers may not care even if they do understand our approach. That could require us to increase our pricing, or change our advertising or promotional strategies, which could adversely affect our business, financial condition, and results of operations or the brand identity that we have tried to create. We have increased our pricing several times in the past few years (including in 2021 and 2022) and may increase prices further in the future due to the increased costs of labor or ingredients or other factors, which could negatively affect the loyalty of our existing customers and cause them to reduce their spending with us or impact our ability to acquire new customers, particularly as we expand our footprint into new geographies where customers might have greater price sensitivity. If customers are not persuaded that we offer a good value for their money, we may not be able to grow or maintain our customer base, which would have an adverse effect on our business, financial condition, and results of operations. Current macroeconomic conditions, such as inflation and increasing interest rates, which have been become more challenging during and following the thirteen weeks ended September 25, 2022, increase the risk of a potential economic downturn. These macroeconomic conditions can also negatively impact consumer discretionary spend and coupled with slower than expected return to office during and following the COVID-19 pandemic (including as a result of many workplaces adopting remote or hybrid models), has led to our revenue growth slowing (and much of such revenue regrowth was driven by a price increase taken in the first quarter of fiscal year 2022). In order to mitigate these risks, we have implemented and may in the future have to implement additional cost cutting measures, as described in Management’s Discussion & Analysis in this Quarterly Report on Form 10-Q.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

The following exhibits are included herein or incorporated herein by reference:

Exhibit Number

Exhibit Description

Form

File No.

Exhibit

Filing Date

Filed Herewith

3.1

Amended and Restated Certificate of Incorporation of the Registrant

8-K

001-41069

3.1

11/22/2021

3.2

Amended and Restated Bylaws of the Registrant

8-K

001-41069

3.2

11/22/2021

31.1

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1†

Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

XBRL Instance Document (embedded within the Inline XBRL document)

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

__________

† The certifications attached as Exhibit 32.1 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the SEC and are not to be incorporated by reference into any filing of the Registrant under the Securities Act, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	SWEETGREEN, INC.

Date: November 8, 2022	By:	/s/ Mitch Reback
		Mitch Reback
		Chief Financial Officer (Principal Financial Officer, Principal Accounting Officer, and Duly Authorized Signatory)