# Cava Group, Inc.: Form 10-Q for the period ended Oct 1, 2023

- Company: [Cava Group, Inc.](/companies/cava.md) (CIK 1639438)
- Form: 10-Q
- Filed: 2023-11-08
- Accepted by EDGAR: Nov 7, 2023, 17:54 ET
- Period: 2023-10-01
- Accession: 0001628280-23-037474
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1639438/000162828023037474/cava-20231001.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1639438/000162828023037474/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-10-01.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-10 to 2023-10-01 | $175.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2022-12-26 to 2023-10-01 | $551.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Gross profit | 3 months, 2023-07-10 to 2023-10-01 | $44.5m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2022-12-26 to 2023-10-01 | $140.5m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-07-10 to 2023-10-01 | $24.5m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2022-12-26 to 2023-10-01 | $76.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-10 to 2023-10-01 | $2.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2022-12-26 to 2023-10-01 | $6.3m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-07-10 to 2023-10-01 | $38.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-12-26 to 2023-10-01 | $116.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-10 to 2023-10-01 | $6.8m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-12-26 to 2023-10-01 | $11.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-10 to 2023-10-01 | $0.06 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2022-12-26 to 2023-10-01 | $0.24 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-10 to 2023-10-01 | $0.06 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2022-12-26 to 2023-10-01 | $0.26 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-10 to 2023-10-01 | 117,713,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2022-12-26 to 2023-10-01 | 45,966,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2022-12-26 to 2023-10-01 | $73.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2022-12-26 to 2023-10-01 | $107.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2022-12-26 to 2023-10-01 | $1.6m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-10-01 | $340.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-10-01 | $363.6m | us-gaap:AssetsCurrent |
| Total assets | at 2023-10-01 | $985.0m | us-gaap:Assets |
| Current liabilities | at 2023-10-01 | $112.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-10-01 | $419.3m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-10-01 | $565.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 43,300 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited interim condensed consolidated financial statements and the related notes included elsewhere in this Form 10-Q, and our final prospectus filed with the United States Securities and Exchange Commission (the “SEC”) on June 16, 2023 pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Prospectus”). In addition to historical information, this discussion and analysis contains forward-looking statements based on current expectations that involve risks, uncertainties, and other factors outside the Company’s control, as well as assumptions, such as our plans, objectives, expectations, and intentions. Our actual results may differ materially from those expressed or implied in the forward-looking statements as a result of various factors, including those described under the sections entitled “Cautionary Statement Concerning Forward-Looking Statements” above and “Risk Factors” in the Prospectus and our other filings with the SEC.*

### Overview

CAVA is the category-defining Mediterranean fast-casual restaurant brand, bringing together healthful food and bold, satisfying flavors at scale. Our brand and our opportunity transcend the Mediterranean category to compete in the large and growing limited-service restaurant sector as well as the health and wellness food category. CAVA serves guests across gender lines, age groups, and income levels and benefits from generational tailwinds created by consumer demand for healthy living and a demographic shift towards greater ethnic diversity. We meet consumers’ desires to engage with convenient, authentic, purpose-driven brands that view food as a source of self-expression. The broad appeal of our food combined with these favorable industry trends drive our vast opportunity for continued growth.

As of October 1, 2023, we owned and operated 290 CAVA restaurants in 24 states and Washington, D.C., which includes 152 Zoes Kitchen locations successfully converted into CAVA restaurants. We anticipate having 17 to 20 Net New CAVA Restaurant Openings in the fourth quarter of fiscal 2023, which includes one remaining conversion of a Zoes Kitchen location that opened on October 20, 2023.

### Segments

We have two reportable segments: CAVA and Zoes Kitchen. CAVA reflects the financial results of all CAVA restaurants we operate. Zoes Kitchen reflects the financial results of all Zoes Kitchen locations we previously operated. As of October 1, 2023, we operated 290 CAVA restaurants. As of March 2, 2023, we no longer operate any Zoes Kitchen locations. Our Consumer Packaged Goods (“CPG”) operations are included in Other.

### Initial Public Offering

On June 20, 2023, we completed an initial public offering (the “IPO”) of 16,611,110 shares of common stock at a price of $22.00 per share, which included 2,166,666 shares sold to the underwriters pursuant to their option to purchase additional shares. After underwriting discounts and commissions of $22.8 million and offering expenses of $6.5 million, we received net proceeds from the offering of $336.1 million, of which $0.2 million of offering expenses were unpaid as of October 1, 2023. In connection with the IPO, 95,203,554 outstanding shares of preferred stock were converted into an equivalent number of shares of common stock. See Item 1, Financial Statements, Note 1 (Nature of Operations and Basis of Presentation) and Note 8 (Redeemable Preferred Stock and Stockholders’ Equity) for more information.

### Key Performance Measures

In assessing the performance of our business, in addition to considering a variety of measures in accordance with GAAP, our management team also considers a variety of other key performance measures, including non-GAAP measures. The key performance measures used by our management for determining how our business is performing are: CAVA Revenue, CAVA Same Restaurant Sales Growth, CAVA AUV, CAVA Restaurant-Level Profit, CAVA Restaurant-Level Profit Margin, CAVA Restaurants, Net New CAVA Restaurant Openings, CAVA Digital Revenue Mix, Adjusted EBITDA, and Adjusted EBITDA Margin.

We believe that these key financial measures provide useful information to users of our financial statements in understanding and evaluating our results of operations in the same manner as our management team. The presentation of these key performance measures, including Adjusted EBITDA and Adjusted EBITDA margin, which are non-GAAP financial measures, is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. See “Non-GAAP Financial Measures” below.

The following table sets forth our key performance measures for the periods presented:

*($ in thousands)*

|  | Twelve Weeks Ended October 1, 2023 | October 2, 2022 | Change | Forty Weeks Ended October 1, 2023 | October 2, 2022 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| CAVA Revenue | $173,759 | $116,213 | $57,546 | $541,609 | $333,546 | $208,063 |
| CAVA Same Restaurant Sales Growth | 14.1% | 9.2% | 4.9% | 20.1% | 13.9% | 6.2% |
| CAVA AUV (1) | $2,640 | $2,383 | $257 | $2,640 | $2,383 | $257 |
| CAVA Restaurant-Level Profit | $43,580 | $25,221 | $18,359 | $138,179 | $68,066 | $70,113 |
| CAVA Restaurant-Level Profit Margin | 25.1% | 21.7% | 3.4% | 25.5% | 20.4% | 5.1% |
| CAVA Restaurants (2) | 290 | 214 | 76 | 290 | 214 | 76 |
| Net New CAVA Restaurant Openings | 11 | 19 | (8) | 53 | 50 | 3 |
| CAVA Digital Revenue Mix | 35.5% | 32.9% | 2.6% | 36.1% | 34.0% | 2.1% |
| Net income (loss) | $6,833 | $(11,893) | $18,726 | $11,231 | $(40,141) | $51,372 |
| Adjusted EBITDA (3) | $19,788 | $4,838 | $14,950 | $58,135 | $9,128 | $49,007 |
| Net income (loss) margin | 3.9% | (8.5)% | 12.4% | 2.0% | (9.2)% | 11.2% |
| Adjusted EBITDA margin (3) | 11.3% | 3.5% | 7.8% | 10.5% | 2.1% | 8.4% |
| (1) For purposes of calculating CAVA AUV for the reporting periods ended October 1, 2023 and October 2, 2022, the applicable measurement period is the entire trailing thirteen periods ended October 1, 2023 and October 2, 2022, respectively. |  |  |  |  |  |  |
| (2) As of the end of the specified reporting period. |  |  |  |  |  |  |
| (3) See “Non-GAAP Financial Measures” below for a discussion of Adjusted EBITDA and Adjusted EBITDA Margin and a reconciliation of Adjusted EBITDA to net income/(loss), the most directly comparable GAAP measure to Adjusted EBITDA. Adjusted EBITDA Margin is Adjusted EBITDA as a percentage of revenue. |  |  |  |  |  |  |

### CAVA Restaurants and Net New CAVA Restaurant Openings

The following table details CAVA restaurant unit data for the periods indicated.

| CAVA Restaurants | Twelve Weeks Ended October 1, 2023 | October 2, 2022 | Forty Weeks Ended October 1, 2023 | October 2, 2022 |
| --- | ---: | ---: | ---: | ---: |
| Beginning of period | 279 | 195 | 237 | 164 |
| New CAVA restaurant openings, including converted Zoes Kitchen locations | 11 | 19 | 54 | 51 |
| Permanent closure | — | — | (1) | (1) |
| End of period | 290 | 214 | 290 | 214 |

**Results of Operation**s

Our results of operations, on a consolidated basis and by segment, for the twelve and forty weeks ended October 1, 2023 and October 2, 2022 are set forth below. We present our segment results before our consolidated results as we believe that our CAVA segment is more useful and meaningful in assessing the performance of our business, which is mainly driven by our CAVA segment. As of March 2, 2023, we no longer operate any Zoes Kitchen locations, and on October 20, 2023 our conversion strategy was completed with the last conversion restaurant opening. As a result, we have limited our discussion of the Zoes Kitchen segment. In addition, because our consolidated results of operations include the results of our Zoes Kitchen segment, we believe that our consolidated results of operations are less indicative of our performance as compared to our CAVA segment.

The following table summarizes our segment results for the twelve and forty weeks ended October 1, 2023 and October 2, 2022:

*($ in thousands)*

| Revenue | Twelve Weeks Ended October 1, 2023 | October 2, 2022 | Forty Weeks Ended October 1, 2023 | October 2, 2022 |
| --- | ---: | ---: | ---: | ---: |
| CAVA | $173,759 | $116,213 | $541,609 | $333,546 |
| Zoes Kitchen | — | 21,432 | 3,867 | 94,996 |
| Other | 1,794 | 1,613 | 6,054 | 5,642 |
| Total revenue | 175,553 | 139,258 | 551,530 | 434,184 |
| Restaurant-level operating expenses (1) |  |  |  |  |
| CAVA | 130,179 | 90,992 | 403,430 | 265,480 |
| Zoes Kitchen | — | 20,263 | 4,044 | 89,497 |
| Other | 887 | 1,595 | 3,574 | 5,050 |
| Total restaurant-level operating expenses | 131,066 | 112,850 | 411,048 | 360,027 |
| Restaurant-level profit (loss) |  |  |  |  |
| CAVA | 43,580 | 25,221 | 138,179 | 68,066 |
| Zoes Kitchen | — | 1,169 | (177) | 5,499 |
| Other | 907 | 18 | 2,480 | 592 |
| Total restaurant-level profit | 44,487 | 26,408 | 140,482 | 74,157 |
| Reconciliation of restaurant-level profit to income (loss) before income taxes: |  |  |  |  |
| General and administrative expenses | 24,472 | 16,547 | 76,817 | 53,768 |
| Depreciation and amortization | 11,528 | 10,018 | 35,096 | 31,783 |
| Restructuring and other costs | 1,092 | 2,055 | 5,160 | 4,989 |
| Pre-opening costs | 3,410 | 6,175 | 12,809 | 14,225 |
| Impairment and asset disposal costs | 1,190 | 3,838 | 4,295 | 9,848 |
| Interest (income) expense, net | (3,956) | (115) | (4,630) | 262 |
| Other income, net | (120) | (188) | (412) | (644) |
| Income (loss) before income taxes | $6,871 | $(11,922) | $11,347 | $(40,074) |
| (1) Restaurant-level operating expenses consist of food, beverage, and packaging (excluding depreciation and amortization), labor, occupancy, and other operating expenses. |  |  |  |  |

### Comparison of the twelve weeks ended October 1, 2023 and October 2, 2022

### CAVA Segment Results

The following table summarizes the results of the CAVA segment for the twelve weeks ended October 1, 2023 and October 2, 2022:

*($ in thousands)*

|  | Twelve Weeks Ended October 1, 2023 $% of Revenue |  | October 2, 2022 $% of Revenue |  | Change $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Restaurant revenue | $173,759 | 100.0% | $116,213 | 100.0% | $57,546 | 49.5% |
| Restaurant operating expenses (excluding depreciation and amortization) |  |  |  |  |  |  |
| Food, beverage, and packaging | 51,085 | 29.4 | 36,402 | 31.3 | 14,683 | 40.3 |
| Labor | 43,913 | 25.3 | 30,232 | 26.0 | 13,681 | 45.3 |
| Occupancy | 13,782 | 7.9 | 9,747 | 8.4 | 4,035 | 41.4 |
| Other operating expenses | 21,399 | 12.3 | 14,611 | 12.6 | 6,788 | 46.5 |
| Total restaurant operating expenses | 130,179 | 74.9 | 90,992 | 78.3 | 39,187 | 43.1 |
| Restaurant-level profit | $43,580 | 25.1% | $25,221 | 21.7% | $18,359 | 72.8% |

20

#### CAVA Revenue:

The increase in CAVA Revenue was primarily due to a $41.2 million increase from the 95 Net New CAVA Restaurant Openings during or subsequent to the twelve weeks ended October 2, 2022, of which the majority was attributable to the 60 CAVA restaurants that were converted from Zoes Kitchen locations. The remainder of the increase in CAVA Revenue was driven by CAVA Same Restaurant Sales Growth of 14.1%, which consists of 7.6% from guest traffic increases and 6.5% from menu price increases and product mix.

#### CAVA Food, beverage, and packaging:

The increase in CAVA food, beverage, and packaging was primarily due to a $13.4 million increase from the 95 Net New CAVA Restaurant Openings during or subsequent to the twelve weeks ended October 2, 2022, of which the majority was attributable to the 60 CAVA restaurants that were converted from Zoes Kitchen locations. The remainder of the increase was primarily due to CAVA Same Restaurant Sales Growth of 14.1%.

As a percentage of CAVA Revenue, CAVA food, beverage, and packaging decreased primarily due to lower input costs and a higher incidence of premium menu items driving favorable product mix.

#### CAVA Labor:

The increase in CAVA labor was primarily due to a $11.9 million increase from the 95 Net New CAVA Restaurant Openings during or subsequent to the twelve weeks ended October 2, 2022, of which the majority was attributable to the 60 CAVA restaurants that were converted from Zoes Kitchen locations. The remainder of the increase was primarily due to CAVA Same Restaurant Sales Growth of 14.1%. These increases include the impact of higher average hourly wages.

As a percentage of CAVA Revenue, CAVA labor decreased due to strong sales, partially offset by an increase in average hourly wages and an increased mix of new restaurants.

#### CAVA Occupancy:

The increase in CAVA occupancy was primarily due to a $3.5 million increase from 95 Net New CAVA Restaurant Openings during or subsequent to the twelve weeks ended October 2, 2022, of which the majority was attributable to the 60 CAVA restaurants that were converted from Zoes Kitchen locations.

As a percentage of CAVA Revenue, CAVA occupancy decreased primarily due to improved operating leverage associated with higher sales.

#### CAVA Other operating expenses:

The increase in CAVA other operating expenses was primarily due to a $5.8 million increase from 95 Net New CAVA Restaurant Openings during or subsequent to the twelve weeks ended October 2, 2022, of which the majority was attributable to the 60 CAVA restaurants that were converted from Zoes Kitchen locations. The remainder of the increase was primarily due to CAVA Same Restaurant Sales Growth of 14.1%.

As a percentage of CAVA Revenue, CAVA other operating expenses decreased primarily due to operating leverage from higher sales.

### Zoes Kitchen Segment Results

The following table summarizes the results of the Zoes Kitchen segment for the twelve weeks ended October 1, 2023 and October 2, 2022:

*($ in thousands)*

|  | Twelve Weeks Ended October 1, 2023 $% of Revenue |  | October 2, 2022 $% of Revenue |  | Change $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Restaurant revenue | $— | —% | $21,432 | 100.0% | $(21,432) | (100.0)% |
| Restaurant operating expenses (excluding depreciation and amortization) |  |  |  |  |  |  |
| Food, beverage, and packaging | — | — | 6,733 | 31.4 | (6,733) | (100.0) |
| Labor | — | — | 6,961 | 32.5 | (6,961) | (100.0) |
| Occupancy | — | — | 2,555 | 11.9 | (2,555) | (100.0) |
| Other operating expenses | — | — | 4,014 | 18.7 | (4,014) | (100.0) |
| Total restaurant operating expenses | — | — | 20,263 | 94.5 | (20,263) | (100.0) |
| Restaurant-level profit | $— | —% | $1,169 | 5.5% | (1,169) | (100.0)% |

As of March 2, 2023, the Company no longer operates any Zoes Kitchen locations.

### Other Results

The following table summarizes remaining activity related to our CPG operations for the twelve weeks ended October 1, 2023 and October 2, 2022:

*($ in thousands)*

|  | Twelve Weeks Ended October 1, 2023 $% of Revenue |  | October 2, 2022 $% of Revenue |  | Change $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | $1,794 | 100.0% | $1,613 | 100.0% | $181 | 11.2% |
| Food, beverage, and packaging | 733 | 40.9 | 1,482 | 91.9 | (749) | (50.5) |
| Other operating expenses | 154 | 8.6 | 113 | 7.0 | 41 | 36.3 |

The increase in Other revenue was primarily as a result of increased sales of dips, spreads, and dressings. The decrease in food, beverage, and packaging was due in part to lower input costs.

### Consolidated Results

The following table summarizes our consolidated results of operations for the twelve weeks ended October 1, 2023 and October 2, 2022:

*($ in thousands)*

|  | Twelve Weeks Ended October 1, 2023 $% of Revenue |  | October 2, 2022 $% of Revenue |  | Change $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | $175,553 | 100.0% | $139,258 | 100.0% | $36,295 | 26.1% |
| Operating expenses: |  |  |  |  |  |  |
| Restaurant operating costs (excluding depreciation and amortization) |  |  |  |  |  |  |
| Food, beverage, and packaging | 51,818 | 29.5 | 44,617 | 32.0 | 7,201 | 16.1 |
| Labor | 43,913 | 25.0 | 37,193 | 26.7 | 6,720 | 18.1 |
| Occupancy | 13,782 | 7.9 | 12,302 | 8.8 | 1,480 | 12.0 |
| Other operating expenses | 21,553 | 12.3 | 18,738 | 13.5 | 2,815 | 15.0 |
| Total restaurant operating expenses | 131,066 | 74.7 | 112,850 | 81.0 | 18,216 | 16.1 |
| General and administrative expenses | 24,472 | 13.9 | 16,547 | 11.9 | 7,925 | 47.9 |

22

|  |  |  |  |  |  |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Depreciation and amortization | 11,528 | 6.6 | 10,018 | 7.2 | 1,510 | 15.1 |
| Restructuring and other costs | 1,092 | 0.6 | 2,055 | 1.5 | (963) | (46.9) |
| Pre-opening costs | 3,410 | 1.9 | 6,175 | 4.4 | (2,765) | (44.8) |
| Impairment and asset disposal costs | 1,190 | 0.7 | 3,838 | 2.8 | (2,648) | (69.0) |
| Total operating expenses | 172,758 | 98.4 | 151,483 | 108.8 | 21,275 | 14.0 |
| Income (loss) from operations | 2,795 | 1.6 | (12,225) | (8.8) | 15,020 | (122.9) |
| Interest income, net | (3,956) | (2.3) | (115) | (0.1)% | (3,841) | N/M |
| Other income, net | (120) | (0.1) | (188) | (0.1) | 68 | (36.2) |
| Income (loss) before income taxes | 6,871 | 3.9 | (11,922) | (8.6) | 18,793 | (157.6) |
| Provision for (benefit from) income taxes | 38 | — | (29) | — | 67 | (231.0) |
| Net income (loss) | $6,833 | 3.9% | $(11,893) | (8.5)% | $18,726 | (157.5)% |
| N/M data not meaningful |  |  |  |  |  |  |

#### Revenue:

The increase in consolidated revenue was primarily driven by a $57.5 million increase in our CAVA segment, partially offset by a $21.4 million decrease in our Zoes Kitchen segment, which was no longer operating as of March 2, 2023. Refer to CAVA Segment Results above for more information.

#### Food, beverage, and packaging:

The increase in consolidated food, beverage, and packaging was primarily driven by a $14.7 million increase in our CAVA segment, partially offset by a $6.7 million decrease in our Zoes Kitchen segment. Refer to CAVA Segment Results above for more information.

#### Labor:

The increase in consolidated labor was primarily driven by a $13.7 million increase in our CAVA segment, partially offset by a $7.0 million decrease in our Zoes Kitchen segment. Refer to CAVA Segment Results above for more information.

#### Occupancy:

The increase in consolidated occupancy was primarily driven by a $4.0 million increase in our CAVA segment, partially offset by a $2.6 million decrease in our Zoes Kitchen segment. Refer to CAVA Segment Results above for more information.

#### Other operating expenses:

The increase in consolidated other operating expenses was primarily driven by an $6.8 million increase in our CAVA segment, partially offset by a $4.0 million decrease in our Zoes Kitchen segment. Refer to CAVA Segment Results above for more information.

#### General and administrative expenses:

The increase in general and administrative expenses was primarily due to higher equity-based compensation, which includes the impact of awards made in connection with the IPO, recurring public company costs, higher performance-based accruals associated with strong results, and investments in our corporate functions, including headcount, to support future growth.

#### Depreciation and amortization:

The increase in depreciation and amortization was driven by the addition of assets from 95 New Net CAVA Restaurants Openings and technology improvements partially offset by the disposal of assets from 79 closed Zoes Kitchen locations.

#### Restructuring and other costs:

The decrease in restructuring and other costs was primarily due to costs incurred in the prior year quarter related to public company readiness and the relocation of our collaboration center.

#### Pre-opening costs:

The decrease in pre-opening costs was due to the timing and volume of Net New CAVA Restaurant Openings and improved cost efficiencies.

#### Impairment and asset disposal costs:

The decrease in impairment and asset disposal costs was primarily due to higher costs in the prior year quarter in connection with Zoes Kitchen actual and anticipated closures.

#### Interest (income) expense, net

The increase in interest (income) expense, net, was due to interest income associated with an increase in short term investments as a result of proceeds from the IPO.

#### Other income, net:

Other income, net was relatively flat.

#### Income (loss) before income taxes:

The increase in income before income taxes was due to the factors described above.

#### Provision for income taxes:

The provision for income taxes was an immaterial amount for each of the twelve weeks ended October 1, 2023 and October 2, 2022.

#### Net income (loss):

Our net income increased as a result of the factors described above.

### Comparison of the forty weeks ended October 1, 2023 and October 2, 2022

### CAVA Segment Results

The following table summarizes the results of the CAVA segment for the forty weeks ended October 1, 2023 and October 2, 2022:

*($ in thousands)*

|  | Forty Weeks Ended October 1, 2023 $% of Revenue |  | October 2, 2022 $% of Revenue |  | Change $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Restaurant revenue | $541,609 | 100.0% | $333,546 | 100.0% | $208,063 | 62.4% |
| Restaurant operating expenses (excluding depreciation and amortization) |  |  |  |  |  |  |
| Food, beverage, and packaging | 157,720 | 29.1 | 105,258 | 31.6 | 52,462 | 49.8 |
| Labor | 136,978 | 25.3 | 89,902 | 27.0 | 47,076 | 52.4 |
| Occupancy | 43,273 | 8.0 | 30,114 | 9.0 | 13,159 | 43.7 |
| Other operating expenses | 65,459 | 12.1 | 40,206 | 12.1 | 25,253 | 62.8 |
| Total restaurant operating expenses | 403,430 | 74.5 | 265,480 | 79.6 | 137,950 | 52.0 |
| Restaurant-level profit | $138,179 | 25.5% | $68,066 | 20.4% | $70,113 | 103.0% |

#### CAVA Revenue:

The increase in CAVA Revenue was primarily due to a $141.1 million increase from the 126 Net New CAVA Restaurant Openings during or subsequent to the forty weeks ended October 2, 2022, of which the majority was attributable to the 90 CAVA restaurants that were converted from Zoes Kitchen locations. The remainder of the increase in CAVA Revenue was driven by CAVA Same Restaurant Sales Growth of 20.1%, which consists of 12.0% from guest traffic increases and 8.1% from menu price increases and product mix.

#### CAVA Food, beverage, and packaging:

The increase in CAVA food, beverage, and packaging was primarily due to a $38.1 million increase from the 126 Net New CAVA Restaurant Openings during or subsequent to the forty weeks ended October 2, 2022, of which the majority was attributable to the 90 CAVA restaurants that were converted from Zoes Kitchen locations. The remainder of the increase was primarily due to CAVA Same Restaurant Sales Growth of 20.1%.

As a percentage of CAVA Revenue, CAVA food, beverage, and packaging decreased primarily due to lower input costs and a higher incidence of premium menu items driving favorable product mix.

#### CAVA Labor:

The increase in CAVA labor was primarily due to a $35.4 million increase from the 126 Net New CAVA Restaurant Openings during or subsequent to the forty weeks ended October 2, 2022, of which the majority was attributable to the 90 CAVA restaurants that were converted from Zoes Kitchen locations. The remainder of the increase was primarily due to CAVA Same Restaurant Sales Growth of 20.1%. These increases include the impact of higher average hourly wages.

As a percentage of CAVA Revenue, CAVA labor decreased due to strong sales, partially offset by an increase in average hourly wages and an increased mix of new restaurants.

#### CAVA Occupancy:

The increase in CAVA occupancy was primarily due to a $10.1 million increase from 126 Net New CAVA Restaurant Openings during or subsequent to the forty weeks ended October 2, 2022, of which the majority was attributable to the 90 CAVA restaurants that were converted from Zoes Kitchen locations.

As a percentage of CAVA Revenue, CAVA occupancy decreased largely due to improved operating leverage associated with higher sales.

#### CAVA Other operating expenses:

The increase in CAVA other operating expenses was primarily due to a $16.3 million increase from 126 Net New CAVA Restaurant Openings during or subsequent to the forty weeks ended October 2, 2022, of which the majority was attributable to the 90 CAVA restaurants that were converted from Zoes Kitchen locations. The remainder of the increase was primarily due to CAVA Same Restaurant Sales Growth of 20.1%.

As a percentage of CAVA Revenue, CAVA other operating expenses was flat primarily due to operating leverage, partially offset by a reduction to an insurance accrual in the prior year period.

### Zoes Kitchen Segment Results

The following table summarizes the results of the Zoes Kitchen segment for the forty weeks ended October 1, 2023 and October 2, 2022:

*($ in thousands)*

|  | Forty Weeks Ended October 1, 2023 $% of Revenue |  | October 2, 2022 $% of Revenue |  | Change $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | --- |
| Restaurant revenue | $3,867 | 100.0% | $94,996 | 100.0% | $(91,129) | N/M |
| Restaurant operating expenses, excluding depreciation and amortization: |  |  |  |  |  |  |
| Food, beverage, and packaging | 1,141 | 29.5 | 29,315 | 30.9 | (28,174) | N/M |
| Labor | 1,506 | 38.9 | 32,044 | 33.7 | (30,538) | N/M |
| Occupancy | 508 | 13.1 | 11,142 | 11.7 | (10,634) | N/M |
| Other operating expenses | 889 | 23.0 | 16,996 | 17.9 | (16,107) | N/M |
| Total restaurant operating expenses | 4,044 | 104.6 | 89,497 | 94.2 | (85,453) | N/M |
| Restaurant-level profit (loss) | $(177) | (4.6)% | $5,499 | 5.8% | $(5,676) | N/M |
| N/M data not meaningful |  |  |  |  |  |  |

As of March 2, 2023, the Company no longer operates any Zoes Kitchen locations, which resulted in the decreases above.

### Other Results

The following table summarizes remaining activity related to our CPG operations for the forty weeks ended October 1, 2023 and October 2, 2022:

*($ in thousands)*

|  | Forty Weeks Ended October 1, 2023 $% of Revenue |  | October 2, 2022 $% of Revenue |  | Change $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | $6,054 | 100.0% | $5,642 | 100.0% | $412 | 7.3% |
| Food, beverage, and packaging | 3,075 | 50.8 | 4,689 | 83.1 | (1,614) | (34.4) |
| Other operating expenses | 499 | 8.2 | 361 | 6.4 | 138 | 38.2 |

The increase in Other revenue was primarily as a result of increased sales of dips, spreads, and dressings. The decrease in food, beverage, and packaging was due in part to lower input costs.

### Consolidated Results

The following table summarizes our consolidated results of operations for the forty weeks ended October 1, 2023 and October 2, 2022:

*($ in thousands)*

|  | Forty Weeks Ended October 1, 2023 $% of Revenue |  | October 2, 2022 $% of Revenue |  | Change $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | $551,530 | 100.0% | $434,184 | 100.0% | $117,346 | 27.0% |
| Operating expenses: |  |  |  |  |  |  |
| Restaurant operating costs (excluding depreciation and amortization) |  |  |  |  |  |  |
| Food, beverage, and packaging | 161,936 | 29.4 | 139,262 | 32.1 | 22,674 | 16.3 |
| Labor | 138,484 | 25.1 | 121,946 | 28.1 | 16,538 | 13.6 |
| Occupancy | 43,781 | 7.9 | 41,256 | 9.5 | 2,525 | 6.1 |
| Other operating expenses | 66,847 | 12.1 | 57,563 | 13.3 | 9,284 | 16.1 |
| Total restaurant operating expenses | 411,048 | 74.5 | 360,027 | 82.9 | 51,021 | 14.2 |

26

|  |  |  |  |  |  |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| General and administrative expenses | 76,817 | 13.9 | 53,768 | 12.4 | 23,049 | 42.9 |
| Depreciation and amortization | 35,096 | 6.4 | 31,783 | 7.3 | 3,313 | 10.4 |
| Restructuring and other costs | 5,160 | 0.9 | 4,989 | 1.1 | 171 | 3.4 |
| Pre-opening costs | 12,809 | 2.3 | 14,225 | 3.3 | (1,416) | (10.0) |
| Impairment and asset disposal costs | 4,295 | 0.8 | 9,848 | 2.3 | (5,553) | (56.4) |
| Total operating expenses | 545,225 | 98.9 | 474,640 | 109.3 | 70,585 | 14.9 |
| Income (loss) from operations | 6,305 | 1.1 | (40,456) | (9.3) | 46,761 | (115.6) |
| Interest (income) expense, net | (4,630) | (0.8) | 262 | 0.1 | (4,892) | (1867.2) |
| Other income, net | (412) | (0.1) | (644) | (0.1) | 232 | (36.0) |
| Income (loss) before income taxes | 11,347 | 2.1 | (40,074) | (9.2) | 51,421 | (128.3) |
| Provision for (benefit from) income taxes | 116 | — | 67 | — | 49 | 73.1 |
| Net income (loss) | $11,231 | 2.0% | $(40,141) | (9.2)% | $51,372 | (128.0)% |

#### Revenue:

The increase in consolidated revenue was primarily driven by a $208.1 million increase in our CAVA segment, partially offset by a $91.1 million decrease in our Zoes Kitchen segment, which was no longer operating as of March 2, 2023. Refer to CAVA Segment Results above for more information.

#### Food, beverage, and packaging:

The increase in consolidated food, beverage, and packaging was primarily driven by a $52.5 million increase in our CAVA segment, partially offset by a $28.2 million decrease in our Zoes Kitchen segment. Refer to CAVA Segment Results above for more information.

#### Labor:

The increase in consolidated labor was primarily driven by a $47.1 million increase in our CAVA segment, partially offset by a $30.5 million decrease in our Zoes Kitchen segment. Refer to CAVA Segment Results above for more information.

#### Occupancy:

The increase in consolidated occupancy was primarily driven by a $13.2 million increase in our CAVA segment, partially offset by an $10.6 million decrease in our Zoes Kitchen segment. Refer to CAVA Segment Results above for more information.

#### Other operating expenses:

The increase in consolidated other operating expenses was primarily driven by a $25.3 million increase in our CAVA segment, partially offset by a $16.1 million decrease in our Zoes Kitchen segment. Refer to CAVA Segment Results above for more information.

#### General and administrative expenses:

The increase in general and administrative expenses was primarily due to higher performance-based accruals associated with strong results, investments in our corporate functions, including headcount, to support future growth, higher equity-based compensation associated with awards made in connection with the IPO, recurring public company costs, and $1.1 million in certain non-recurring IPO costs.

#### Depreciation and amortization:

The increase in depreciation and amortization was primarily driven by the addition of assets from 126 Net New CAVA Restaurant Openings and technology improvements, partially offset by the disposal of assets at 125 closed Zoes Kitchen locations.

#### Restructuring and other costs:

The increase in restructuring and other costs was primarily due to costs associated with closed Zoes Kitchen locations and public company readiness, partially offset by costs incurred in the prior year period in connection with the relocation of our collaboration center.

#### Pre-opening costs:

The decrease in pre-opening costs was due to improved cost efficiencies, partially offset by the the timing and volume of Net New CAVA Restaurant Openings.

#### Impairment and asset disposal costs:

The decrease in impairment and asset disposal costs was primarily due to higher costs in the prior year period in connection with Zoes Kitchen actual and anticipated closures.

#### Interest expense, net:

The increase in interest (income) expense, net, was due to interest income associated with an increase in short term investments as a result of proceeds from the IPO.

#### Other income, net:

Other income, net was relatively flat.

#### Loss before income taxes:

The increase in income before income taxes was due to the factors described above.

#### Provision for income taxes:

Provision for income taxes was an immaterial amount for each of the forty weeks ended October 1, 2023 and October 2, 2022.

#### Net income (loss):

Our net income increased as a result of the factors described above.

### Non-GAAP Financial Measures

In addition to our consolidated financial statements, which are prepared in accordance with GAAP, we present Adjusted EBITDA and Adjusted EBITDA Margin as supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP. We believe they assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our operating performance. Management believes Adjusted EBITDA and Adjusted EBITDA Margin are useful to investors in highlighting trends in our operating performance, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate and capital investments. Management uses Adjusted EBITDA and Adjusted EBITDA Margin to supplement GAAP measures of performance in the evaluation of the effectiveness of our business strategies, to make budgeting decisions and to compare our performance against that of other peer companies using similar measures. Management supplements GAAP results with non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone provide.

Adjusted EBITDA and Adjusted EBITDA Margin are not recognized terms under GAAP and should not be considered as alternatives to net income (loss) or net income (loss) margin as measures of financial performance, or cash provided by operating activities as measures of liquidity, or any other performance measure derived in accordance with GAAP. Additionally, these measures are not intended to be measures of free cash flow available for management’s discretionary use, as they do not consider certain cash requirements such as interest payments, tax payments, and debt service requirements. Because not all companies use identical calculations, the presentation of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company.

Our Adjusted EBITDA and Adjusted EBITDA Margin measures 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. Some of these limitations are:

- Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
- Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
- Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debts;
- Adjusted EBITDA does not reflect period to period changes in taxes, income tax expense or the cash necessary to pay income taxes;
- Adjusted EBITDA does not reflect the impact of earnings or cash charges resulting from matters we consider not to be indicative of our ongoing operations;
- although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and
- other companies in our industry may calculate Adjusted EBITDA and Adjusted EBITDA Margin differently than we do, limiting their usefulness as comparative measures.

Because of these limitations, Adjusted EBITDA and Adjusted EBITDA Margin should not be considered as measures of discretionary cash available to invest in business growth or to reduce indebtedness.

The following tables provides a reconciliation of net income (loss) to Adjusted EBITDA and net income (loss) margin to Adjusted EBITDA Margin for the periods presented:

*($ in thousands)*

|  | Twelve Weeks Ended October 1, 2023 | October 2, 2022 | Forty Weeks Ended October 1, 2023 | October 2, 2022 |
| --- | ---: | ---: | ---: | ---: |
| Net income (loss) | $6,833 | $(11,893) | $11,231 | $(40,141) |
| Non-GAAP Adjustments |  |  |  |  |
| Interest (income) expense, net | (3,956) | (115) | (4,630) | 262 |
| Provision for (benefit from) income taxes | 38 | (29) | 116 | 67 |
| Depreciation and amortization | 11,528 | 10,018 | 35,096 | 31,783 |
| Equity-based compensation | 3,183 | 1,152 | 6,166 | 2,964 |
| Other income, net | (120) | (188) | (412) | (644) |
| Impairment and asset disposal costs | 1,190 | 3,838 | 4,295 | 9,848 |
| Restructuring and other costs | 1,092 | 2,055 | 5,160 | 4,989 |
| Certain non-recurring public company costs | — | — | 1,113 | — |
| Adjusted EBITDA | $19,788 | $4,838 | $58,135 | $9,128 |
| Revenue | $175,553 | $139,258 | $551,530 | $434,184 |
| Net income (loss) margin | 3.9% | (8.5)% | 2.0% | (9.2)% |
| Adjusted EBITDA margin | 11.3% | 3.5% | 10.5% | 2.1% |

### Liquidity and Capital Resources

We assess our liquidity in terms of our ability to generate adequate amounts of cash to meet current and future needs. Our expected primary uses on a short-term and long-term basis are for the expansion of our restaurant base and manufacturing capabilities, working capital, and other capital expenditures.

Our rapid expansion has been significantly aided by the Zoes Kitchen acquisition, which enabled us to expand our CAVA restaurant base in a capital-efficient manner. While conversions require initial capital investments, such costs are typically significantly lower for a conversion as compared to a new opening. Therefore, we expect that the capital expenditure requirements relating to Net New CAVA Restaurant Openings on a per restaurant basis in future periods will be significantly higher than we have experienced in the past few years as our conversion strategy is complete as of October 20, 2023.

We believe that cash provided by operating activities and existing cash on hand, together with amounts available under our 2022 Credit Facility, will be sufficient to satisfy our anticipated cash requirements for the next twelve months, including our expected capital expenditures for expansion of our CAVA restaurant base and manufacturing capabilities, operating lease obligations, working capital obligations, and debt service requirements. See Item 1, Financial Statements, Note 7 (Debt) and Note 10 (Leases) to our consolidated financial statements for more information. Our sources of liquidity could be affected by factors described under the section entitled “Risk Factors” in the Prospectus. Depending on the severity and direct impact of these factors on us, we may not be able to secure additional financing on acceptable terms, or at all.

### Cash Overview

We had cash and cash equivalents of $340.4 million and $39.1 million as of October 1, 2023 and December 25, 2022, respectively, the increase of which was primarily due to net proceeds received in connection with the IPO.

For the forty weeks ended October 1, 2023, our operations were primarily funded from cash flows from operations that, together with the IPO proceeds and prior sale and issuance of our Series F Preferred Stock in fiscal 2021, funded capital expenditures. Our principal uses of liquidity for the forty weeks ended October 1, 2023 were to fund new restaurant openings, including the conversion of Zoes Kitchen locations into CAVA restaurants, the construction of our new production facility in Verona, VA and working capital needs.

### Cash Flows

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

*($ in thousands)*

|  | Forty Weeks Ended October 1, 2023 | October 2, 2022 | Change $% |  |
| --- | ---: | ---: | ---: | --- |
| Net cash provided by operating activities | $73,088 | $5,229 | $67,859 | N/M |
| Net cash used in investing activities | (107,564) | (71,736) | (35,828) | 49.9% |
| Net cash provided by (used in) financing activities | 335,750 | (1,659) | 337,409 | N/M |
| Net change in cash and cash equivalents | $301,274 | $(68,166) | $369,440 | N/M |
| N/M data not meaningful |  |  |  |  |

#### Operating Activities:

The increase in net cash provided by operating activities was primarily due to improved operating performance as well as the impact of working capital changes.

#### Investing Activities:

The increase in net cash used in investing activities was primarily due to our investments in capital expenditures as a result of Net New CAVA Restaurant Openings, construction of our new manufacturing facility, and technology improvements.

#### Financing Activities:

The increase in net cash provided by financing activities was primarily due to net proceeds received from our IPO, which closed on June 20, 2023.

### Material Cash Commitments

There has been no significant changes to the material cash commitments as disclosed in the Prospectus for the fiscal year ended December 25, 2022, other than those payments made in the ordinary course of business.

### Credit Facility

Refer to Item 1, Financial Statements, Note 7 (Debt), for a description of our 2022 Credit Facility.

### Critical Accounting Estimates

Our critical accounting policies related to revenue recognition, leases and income taxes have not materially changed from those disclosed in the Prospectus. Our critical accounting policy related to equity-based compensation is as follows:

### Equity-Based Compensation

The Company has issued stock options and restricted stock units (“RSUs”). Equity-based compensation expense is measured based on the grant date fair value of those awards and is recognized on a straight-line basis over the requisite service period. Equity-based compensation expense is based on awards outstanding, and forfeitures are recognized as they occur. Equity-based compensation expense is included in general and administrative expenses in the consolidated statements of operations.

The Company uses the Black-Scholes-Merton (“Black-Scholes”) option-pricing model to estimate the fair value of stock options at the grant date. The use of the Black-Scholes option-pricing model requires the use of highly subjective assumptions, including the expected term, risk-free interest rate, expected volatility, and expected dividend yield of the underlying common stock. The fair value of RSUs is equal to the fair value of our common stock at the date of grant.

### Recent Accounting Pronouncements

Refer to Item 1, Financial Statements, Note 1 (Nature of Operations and Basis of Presentation.)

### JOBS Act Election

We are currently an “emerging growth company,” as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company 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.

## Market risk

As filed, 1,298 characters.

We are exposed to market risks in the ordinary course of business. The primary risks we face area commodity and food price risks, interest rate risk, and the effects of inflation. Except as described below, there have been no material changes to our exposure to market risks as described in the Prospectus.

### Interest Rate Risk

We are exposed to interest rate risk through fluctuations of interest rates on our investments through our cash in our money market accounts. Changes in interest rates affect the interest income we earn, and therefore impact our cash flows and results of operations. As of October 1, 2023, we had $340.4 million of cash and cash equivalents consisting of bank accounts and money market funds. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. Due to the short-term nature of our investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. A hypothetical decrease of 100 basis points to current prevailing market rates applied to our cash and cash equivalents balance as of October 1, 2023, would result in a decrease of $3.4 million in investment income over a twelve month period.

## Controls and procedures

As filed, 1,461 characters.

### 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 Securities Exchange Act of 1934, as amended (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, as appropriate, 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 (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended October 1, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Filed Nov 8, 2023.
Source: SEC EDGAR, the filing index for accession 0001628280-23-037474. Last ingested by Listed: Oct 24, 2026, 15:14 ET. No prices; not investment advice.