CAVA Group, Inc. Price & Performance (CAVA)

You will find reconciliations of any non GAAP financial measures discussed on today's call to the most directly comparable financial measure calculated in accordance with GAAP to the extent available without unreasonable efforts in today's earnings release and supplemental deck. Each of which is posted on the company's website. Before we begin, let me remind everyone that this call will contain forward looking statements. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward looking statements. Investors should be aware that any forward looking statements are subject to various risks [indiscernible] That could cause actual results to differ materially from those discussed here today.

These risk factors are explained in detail in Cabo's most recent annual report on Form 10 ks quarterly report on Form 10 Q and other filings with the SEC.

Please refer to these filings for a more detailed discussion of forward looking statements and the risks and uncertainties of such statements. All forward looking statements are made as of today and except as required by law, Havah undertakes no obligation to publicly update or revise any forward looking statements. Whether as a result of new information, future developments or otherwise. In Now, I'll turn the call over to the company's Co Founder and CEO, Thanks, Matt, and welcome to the call, everyone. 2024 was another extraordinary year for Cava CAVA, thanks to our more than 10,000 team members and their dedication to bringing heart, health and humanity to food. I'm inspired not just by their accomplishments, but by their spirit of generosity, how they take care of our guests, communities and one another.

In 2024, their contributions allowed us to firmly establish Mediterranean as the next major cultural cuisine category [indiscernible] as our unique value proposition continued to resonate with consumers, we were one of just a few publicly traded restaurant brands that generated positive traffic growth. Our success in 2024 demonstrated our broad appeal the power of our unit economic engine and the impact of the investments we have made in our teams, guests and infrastructure to support our growth.

In our first full fiscal year as a public company, we delivered four consecutive quarters of free cash flow. Our fourth quarter highlights include excluding the fifty third week in twenty twenty three, a 36.8% increase in CABVA revenue 21.2% Cava same restaurant sales growth including a 15.6% increase in traffic. 15 net new restaurant openings, ending the year with three sixty seven restaurants, an 18.8% increase year over year adjusted EBITDA of 25,100,000.0 a 60% increase over the fourth quarter of twenty twenty three Net income of $78,600,000 and adjusted net income of $6,500,000 a 216% increase over the fourth quarter of twenty And for the full year, we increased CAVA revenue 35% excluding the fifty third week generated 13.4% Cava same restaurant sales growth including an 8.7% increase in traffic opened 58 net new restaurants, delivered adjusted EBITDA of 126,200,000.0 a 71% increase over the full year of 2023 and adjusted net income of 50,200,000.0 a 278% increase over full year 2023 and drove $52,900,000 in free cash flow during the year. It is clear that our unique value proposition the quality and relevance of our Mediterranean cuisine, the convenience of our multi channel format, and the experiences we provide across our physical and digital channels is meeting the moment for the modern consumer.

We have significant white space opportunity ahead and we're proud to say that 2024 is trending to be one of our strongest new restaurant classes yet. Our most anticipated and successful market opening to date Chicago, marked our entry into the Midwest and expanded our presence to 25 states and the District Columbia, These new restaurants amplify our brand many of them incorporating elements of our project sold design. And their performance demonstrates our broad appeal across socioeconomic demographic and regional lines. Last quarter, we announced plans to enter South Florida Today, I'm excited to share that we are expanding our presence the Midwest, with openings planned in Detroit and Indianapolis, later this year. In addition, we will continue to grow our Mid Atlantic footprint with our first restaurant openings in Pittsburgh, Pennsylvania. As we move forward with our expansion efforts, we remain committed to deepening personal relationships with our guests, whether they are gathering in our dining rooms, or engaging with our digital channels, Our reimagined loyalty program is a foundational element of this strategy and its new earning banks points model has been warmly received. Driving increased engagement and frequency while setting the stage for future innovation. Since we first introduced Rewards Reimagined, we've seen a two thirty basis point increase in loyalty percent of sales.

As we move into 2025, we will build on our multi phase plan by leveraging first party data to deepen guest insights using enhanced rewards [indiscernible] and tailored communications to develop personal touch points across all of our channels. On the culinary front, I'm incredibly proud of our best in class team. We continue to innovate and create newness across our menu, while being thoughtful and operationally disciplined as we go through our stage gate process. Guest reception of Grilled Steak, which we introduced in the summer of twenty twenty four, exceeded our expectations and incidence of this new Maine has remained strong. Similarly, we unveiled our new limited time garlic ranch pita chips introducing a platform for future flavor innovation and further expansion into the snacking category. In 2025, we will continue to build on our robust pipeline of culinary innovation which we'll speak to in the coming quarters. Culinary launches in 2024 awareness and affinity for our brand, In 2024, we generated three forty million social media impressions [indiscernible] By tapping into the organic love for CAVA through partnerships with like minded influencers and creators, were genuine fans even before collaborating with us. The most recent of these partners is Olympic Gold Medal sprinter, Gabby Thomas, who fuels her training regimen in her life with CAVA.

Gabby partnered with us to launch our latest new seasonal menu items. This campaign focused on abundance rather than restriction highlighting the benefits of eating Mediterranean cuisine. We're pleased with the response to the ongoing campaign and we are seeing an incremental increase of our premium protein and avocado incidents As a result, Shifting over to our team members, we are focused on empowering our leaders with the right tools, strategies and processes to run great restaurants at every location, every shift. Our new labor and deployment model helps us put the right people in the right places at the right moments improving the team member experience giving them more time to focus on our guests. While we are still in the early innings, we're already starting to see increased productivity across both dayparts, Reception from the team has been positive, with restaurants refining and optimizing the tools. In 2025, we will continue to build on this initial deployment with a focus on improving speed and service. In 2024, our multiyear Connected Kitchen initiative advanced on multiple fronts. A key milestone was the completion of the test and learn phase for our generative AI video technology which is now live in four restaurants and we intend to expand to more restaurants in 2025.

Additionally, early results from our new kitchen display system currently live in 25 locations are promising. Technology has improved digital order accuracy and productivity, while reducing customer experience complaints in the test locations.

Encouraged by these outcomes, we are planning a broader rollout Including new and existing restaurants, we expect to expand the technology to two fifty restaurants by year end. Building on our exceptional 2024, we will continue to define the category we have created Mediterranean, by anchoring in our four strategic pillars as a guiding force. 2025, we will expand our Mediterranean Way in communities across the country by opening restaurants in new and existing markets, offering warm and welcoming spaces to gather and delight guests with innovative flavors and menu creations. As we move into the next phase of our reimagined loyalty program, we will continue to develop personal relationships with guests even as we scale. Spreading our Mediterranean hospitality and creating a sense of connectedness across all our channels. As we focus on running great restaurants, every location, every shift, we will integrate new technologies and tools to support our team members and enhance the guest experience. And finally, knowing great people are key to unlocking our significant white space opportunity we will continue to operate as a high performing team build out our talent pipeline and create not just jobs, but career opportunities. In a world where screens and automation are infiltrating our everyday lives, we remain committed to using technology to enhance the human experience.

Not replace it. We're leveraging data personalization to help people feel seen for who they are and piloting AI technology that can improve team members' experience and give them more time to take care of our guests.

As the spaces and experiences that once brought us together are being replaced by virtual interactions, we are creating inviting places for people to gather. We know consumers are hungry to feel cared for and we believe that our success is driven not just by our category defining brand and our unique value proposition, but also by our ability to authentically connect with the people we serve. This spirit of connection was beautifully illustrated recently when we had the honor of participating in a one hundredth birthday celebration for Mike in New York whose great grandson wrote to us about Mike's love of Cava and asked if we could be part of this special day. Whether it's Mike's one hundredth birthday, or Anastasia, a high school student in New Jersey, who wrote to us about her tradition of sharing a meal with her sister every Friday at CAVA and how to strengthen their bond we're demonstrating the power and appeal of our brand to connect not just across geographies, but across generations. Cava was built on the idea of welcoming everyone to our table And at a time when people are craving happiness and connection, we are delivering on that promise and proving that bringing heart health and tomato food is a powerful formula for success.

And with that, I'll pass the call over to Tricia to walk you through the financials. Thanks, Brent. Cava revenue in the fourth quarter of twenty grew 36.8% year over year to 225100000.021.2% driven by traffic growth of 15.6%. As a reminder, to achieve an optimal comparison of fifth CAVA [indiscernible] Each week of fiscal twenty twenty three, was shifted by one week. Had this shift not been made, CAVA same restaurant sales growth would have been 18.3% for the quarter representing the expected offset from Q1 of twenty twenty four. Impact of this shift was not material for the full year. During the quarter, we opened 15 net new CAVA CAVA We continue to be pleased with our new restaurant openings, with newer vintages trending to be some of our strongest cohorts to date. In addition, our proven portability is reflected in our overall AUV, which increased from $2,600,000 at the end of twenty twenty three to $2,900,000 at the end of twenty twenty four.

Excluding the benefit of the fifty third week in fifth Cava restaurant level profit margin increased by 50 basis points to 22.4% of revenue. This improvement was primarily due to operating leverage from higher sales partially offset by an increase in food, beverage and packaging costs summer of twenty twenty four and incremental wage investments. [indiscernible] food, beverage and packaging costs or 29.9% of revenue, an increase as compared to the fourth quarter of twenty twenty three. This anticipated increase as a percent of revenue was the result of the launch of the stake in June of twenty twenty four. COVID labor and related costs were 27.3% a decrease of 50 basis points from the fourth quarter of twenty twenty three. This decrease reflects leverage from increased sales, partially offset by investments in our team member wages up 4%. Including the impact of AB1228, which we chose [indiscernible] with menu price increases to the guests. CAVA occupancy and related 70 basis points from the fourth quarter of twenty twenty three due to sales leverage. CavaOther operating expenses were 12.8% of revenue, an increase of 10 basis reflecting investments in the integrity of our physical spaces and support of our increased restaurant volume.

Shifting to overall performance, our general and administrative expenses for the quarter excluding stock based compensation, 23,600,000.0 or 10.4% of revenue compared to 21,300,000.0 or 12% of revenue in the fourth quarter of twenty twenty three. 160 basis point improvement was driven by leverage from higher sales, partially offset by investments to drive future growth.

Equity based compensation was $17,100,000 in 2024 and as a result of the IPO pull forward grant in June of twenty twenty three, did not include a significant impact from new 2024 grants. In 2025, we expect stock based compensation to be between $20,000,000 and $22,000,000 which includes new 2025 grants and approximately 60% of the six be recognized in the first half of the year given the timing of payroll taxes associated with RSU vestings and the extra period in Q1. Adjusted EBITDA including the burden of preopening cost for the quarter was $25,100,000 increase of 60% versus the fourth quarter of twenty twenty three. The increase in adjusted EBITDA was driven by the number and continued strength of new restaurant openings 21.2% Cava same restaurant sales growth and leverage in G and A. During the fourth quarter, we reported $78,600,000 of net income, As I mentioned on our last earnings call, we historically have had a full valuation allowance on our deferred tax assets primarily relating to net operating loss [indiscernible] Which has resulted in immaterial tax expense. Based on our continued positive profitability trends, we released this valuation allowance in the fourth quarter which resulted in a one time significant net P and L benefit of $80,100,000 as a reduction to tax Keep in mind, we expect our cash taxes to continue to be immaterial until we fully utilize our net operating losses.

In fiscal twenty twenty five, we expect our effective tax rate to be between 1520% which includes the expected permanent equity benefit of RSU awards vesting at a higher stock price relative to their grant date. Excluding the impact of the $80,100,000 benefit, and applying a consistent effective tax rate to each quarter in fiscal twenty twenty four adjusted net income was $6,500,000 during the fourth quarter of twenty twenty four compared with net income of $2,000,000 in the fourth quarter of twenty twenty three. This represents an increase of 216% further demonstrating the strength of our business. We reported GAAP diluted earnings per share of $0.66 in the quarter. After accounting for the aforementioned net benefit, adjusted diluted EPS was $0.05 in the fourth quarter compared to $0.02 in the prior year quarter.

Shifting over to liquidity. At the end of the quarter, we had zero debt outstanding. Dollars 366,100,000.0 in cash on hand, and access to a $75,000,000 undrawn revolver, with an option to increase our liquidity if needed. When looking at full year 2024, million dollars compared to $97,100,000 during full year 2020 This increase is primarily driven by our improved operations generating increased profitability across the Free cash flow in 2024 was $52,900,000 an increase of $94,600,000 compared to the full year of 2023. Before turning to our outlook for 2025, I would like to touch on some of the evolving dynamics amongst our most recent NRO classes.

Our team has done an incredible job of delivering on its commitment and as brand awareness and the appeal of Mediterranean cuisine continue to strengthen, we are exceeding our previous new unit economic model. Based on data from the most recent NRO classes, we now anticipate year one average unit volumes to increase to 2,300,000 from 2,100,000 and year two average unit volumes to increase to 2,500,000 from 2,300,000 Year one revenue growth rate to remain at 10% and year two revenue growth rate to remain at 8%. Year two restaurant level profit margin to increase from 20% to 22%. Capital expenditures net of tenant allowances at $1,375,000 per restaurant. And finally, year two average cash on cash returns to increase from at least 35% to at least 40%. [indiscernible] consistent with our prior earnings call, we expect net new restaurant growth of at least 17% and we anticipate that openings to be slightly back half Weighted. Now to our outlook for full year 2025, we expect the [indiscernible] 62 to 66 net new Cava restaurant openings, Cava same restaurant sales growth of 6% to 8% cover restaurant level profit margin between 24.8% to 25.2% pre opening costs between $14,000,000 and $15,000,000 and adjusted EBITDA including the burden of preopening costs between $150,000,000 to 157,000,000 I want to share a few additional thoughts on our outlook.

Turning to same restaurant sales, as mentioned earlier, we anticipate 6% to 8% growth this year. Given the dynamic performance we've seen over the past few years, We believe the best way to think about same restaurant sales on a normalized basis is to view it as a three year stack. We anticipate our three year Zach, to remain robust in the high with higher one year same restaurant sales growth in Q1 and moderating over the course of 2025. As it relates to restaurant level margin as of January 2025, we implemented an approximate 1.7% And at this time, we have no plans for further price increases this year. Additionally, I'd like to remind everyone that we introduced on food, beverage and packaging costs as a percent of [indiscernible] By the summer of twenty twenty five. Further, our traditional seasonality where the fourth quarter is typically approximately 200 basis points lower than the full year experienced a more dramatic impact in 2024 a result, Our guidance takes into consideration what we are currently seeing in the business and the fluidity of the macroeconomic policy environment. Our business continues to be and remains strong [indiscernible] and that strength is appropriately reflected in our guidance.

Kava's economic model is powerful. And as we mentioned on prior calls, we will continue to make prudent [indiscernible] In the business, to drive long term Before turning to Q and A, I want to take a moment to reflect on what an incredible year 2024 has been. None of these results would have been possible without the hard work, dedication and commitment of our restaurant, manufacturing, and collaboration center team. I often say KAVA is a very special place to work and it's the passion and perseverance of our people that make it together, we're building something truly remarkable as we continue to push forward with our mission of bringing heart and humanity to food, And with that, I'll pass it over to the operator for Q and A. Ladies and gentlemen, we will now begin the question and answer Your first question comes from the line of Brian Harber from Morgan Stanley. Yes, thanks. Good afternoon, guys.

I know you had previously mentioned kind of generally flat margin view for this year, but could you just talk about some of the moving parts there? It sounds like food would be sort of a pressure. What are you thinking in terms of sort of any team member investments this year and anything else we should consider just in thinking about margins?

Hey, Brian. Thanks for the question. So when you think about food, the first thing you need to consider is the impact of steak, which we did not have in our offerings until June of last year. And so there's a definite impact in first and second quarter as a result of that. Outside of stake, our inflation in food is in the low single digits. And as we reflected a 1.7% menu price increase, I don't anticipate a lot of significant movements in COGS outside of the steak impact. When we're thinking about labor, we've talked about investments that we have made and continue to make, although at this point, there's not outsized investments planned, we do leave the opportunity to make incremental investments each quarter as we evaluate our competitiveness in wages in each and every market to make sure that we remain an employer of choice in the markets where we serve. Other than that, there's no other real significant changes or should be continued leverage on the occupancy side as sales continue to grow. And we'll continue to look at other operating expenses and ensure that we're making the appropriate [indiscernible] sure that our restaurants are keeping up with the high volume that is existing today.

Thank you. Your next question comes from the line of Andrew Charles from TD Cowen.

Great. Thank you. Brett, I was hoping you could expand on the new focus on speed that won't be the expense of service. Can you help contextualize the size of the prize that you're able to deliver on targeted service times, how big of a traffic opportunity does this represent during peak periods?

Hey, Andrew. Thanks for the question. We know that there's an opportunity at many of our restaurants, our high volume restaurants and sure you've witnessed it in New York where we have lines to the door and we're mindful that we don't want people intimidated by those lines and walking away, but we're also that it's many of our guests first time experiencing our brand, first time eating Mediterranean cuisine, and we want to make sure they have [indiscernible] To have a great experience and choose their meal comfortably. So we haven't quantified it specifically, but we've seen with the new labor deployment scheduling model incremental improvements in speed but also in addition to our service scores. And that's important for us. We don't want it to come at the expense of those customer experience scores. So we'll continue to work with the teams to optimize and ramp up those deployments so that we can continue to increase the speed and have it not come at the expense of service.

Okay. Just a quick follow-up. If I think about an average check for around $15 or so per person, it fair to say that a rule of thumb every five incremental customers per store per day you about a 1% lift in traffic?

Pretty close.

Yes, it's pretty close. And Andrew, the early results of the deployment, we are seeing this improvement across both dayparts. And even on peak and non peak hours. So we're very encouraged by the early returns. But again, in this brand building phase of our growth, we want to make sure that we don't push on the gas pedal too hard and have those negative first time guest experiences. Your next question comes from the line of Chris O'Cull from Stifel. Thanks. Good afternoon, guys. Brett, the update on the loyalty program was very encouraging. First, can you share some baseline frequency data maybe for targeted consumer segment or core versus expansion markets or and then could you also expand on how quickly you can deploy programs using the consumer insights to drive that additional purchase frequency and whether you've tested any programs to kind of prove out effectiveness?

Yes. So thanks for the question, Chris. On the first part of your question, we have not quantified frequency specifically, but what I can say is we've increased the revenue flowing through the loyalty program two thirty basis points, so 2.3% since launch of the program. So we're getting a lot more people in our pool And what we're also seeing is over half of the reward redemptions have come from our entry level reward option in the catalog of menu rewards. So we're seeing that was the goal of the program, if you remember, we wanted that initial reward opportunity bar to be lower.

So people felt like it was more attainable. Our lower frequency users would be more engaged We're seeing that happen. So it's very exciting. And then the second part of your question, one of the insights or one of the tactics that we're now able to leverage in the loyalty program when we launched our garlic ranch pita chips, the entry or the pita chip redemption option is 400 points. We did a limited time offer for half those points for 200 points you could try the garlic ranch pita chips. It was our [indiscernible] redeemed item ever. So we got great trial of a new item, great engagement and excitement. And that's just a small example of the way we can use the rewards program and our first party audience to really add value to their experience and influence behavior. And this year, we'll build on top of that initial deployment and you'll see us add features on top like tiered status levels as well as non food reward options to excite our guests with our brand in unique ways.

Great. Thanks. Your next question comes from the line of David Tarantino from Baird.

Hi, good afternoon. Had a question on the new unit economics. That you shared Thank you for that update. I'm wondering, Tricia, if you could Comment on what you've seen out of the 2024 class and whether the new targets are are anchored on what you're you're seeing or is it something different than that? I guess I would calculate something higher in terms of new unit volumes for what you did in 2024. But any perspective you could offer Kind of what informed your views on the targets That'd be great. Thanks.

Yes. Thanks, David. So certainly, as we look at 2024 class and compare it to 2023, we're seeing very strong performance. And in fact, the cohort that opened in Q4 performing at average weekly sales levels above 2023. Keep in mind, we're still early in looking at these restaurants and under [indiscernible] $2,300,000 in year one with 10% growth driving to $2,500,000 and then 8% growth in the following year. So really pleased with the performance of our new restaurants, the health of our pipe Knees [indiscernible] as well as the increase in restaurant level margin. It really gives us a lot of option optionality as we think about greenfield locations and how we might have opportunities to go into other areas like Brett talked about on the call entering South Florida, Detroit, Pittsburgh and Indianapolis this year. So really excited about what lies ahead and certainly what the portfolio has told us regarding proof of portability and how this model can really deliver.

Great. And one more if I could on this topic. Does your guidance for this year assume the $2,300,000 AUD for the the class you're about to open? It does.

Great.

Next question comes from the line of Sharon Zackfia from William Blair. Please go ahead.

Hi, good afternoon. Congratulations on a great 2024 to say the least. I guess my question was more on the G and A front. It seems like the imputed G and A is accelerating quite a bit in terms of dollar growth. And I know part of that is the stock comp that you mentioned, but it fair to think that a lot of these initiatives that you talked about are falling into that G and A I mean, how do we think about G and A leverage in 2026 and beyond?

Yes. So when we look at G and A, we isolate the stock based compensation impact. And so therefore, we look at G and A growing, but at a lesser rate than our revenue growth as well as our unit count growth. So you will see leverage in G and A over time. However, we've said we really think it's important to make appropriate investments in the business to drive for long term growth just like you see on restaurant level margins and wanting to invest in team members and guests, we've been thoughtful in leaning into G and A ahead of its needs. So that we can be successful as we make prudent Your next question comes from the line of John Tower from Citi.

Please go ahead.

Great. Thanks. Maybe I'll just dig into on the new store productivity side, I appreciate all the color you've been providing. Maybe you could provide a little bit more on perhaps what you're doing from a strategic standpoint within markets to ensure that this productivity level is so high and frankly the returns remain so high. What you've done in the past twelve months twenty four months, I guess, to bump that number so much higher than what we were kind of modeling not that many years ago. Are you engaging kind of people in the market earlier, consumers earlier to build that brand awareness such that you're ramping faster? Just curious if you could shed some light on that. Hey, John, it's Brett. I think a couple of things. One, Tricia's spoken in the past about our balanced portfolio approach. And we take that same balanced approach within established growth, emerging markets, we're mindful of any impact but we also see the opportunity of latent demand. Sometimes when we get outsized performance of a restaurant that there's demand in the adjacent market that we can open up, but we're mindful about how we space that out and we use pretty pretty robust analytics to make sure that we're thoughtful about how we populate these markets so that the restaurants have the space to open and open strong.

I think from an awareness standpoint, you've seen since our IPO significant awareness tailwinds and incredible job our social media and our marketing team has done in amplifying that awareness and the user generated content and the organic awareness that has been growing across social channels. And we're finding that in these markets, people are waiting for us to open and ready for us to open. And then we do our typical traditional community day activities as a way to introduce ourselves to our new neighbors and donate to the local philanthropic organization So, that all comes together to really create a lot of the energy around the brand as we saw whether it was a greenfield market like Chicago or many of our openings in Southern California this year in an existing market And again, we have so many different ways to win as we talked about our top decile, not being one type of restaurant or one geography.

All different types of geographies and trade areas, urban, suburban, college adjacent, ex urban, pickup by car location. So it allows us to create this balanced portfolio approach and then obviously capture the energy in these markets that's been building around the brand. Your next question comes from the line of Ivan Yoo from Jefferies. Please go ahead.

Great. Thanks for taking the question. Just on maybe on menu innovation, is there anything that you should share on on what we should expect, whether it's something on the protein side or other parts of the menu Brett, I think you've used the term tent pole. And so how should we think think about maybe leveraging digital and marketing to enhance the messaging around these offerings for this year? Yes. Thanks, Ivan. I think you'll see a similar cadence to what we've spoken to that annually we want to have at least one tentpole moment. That could be expressed by a new protein, bracketed by a couple of seasonal moments And this quarter, the Gabby Thomas collaboration with the items we partnered with Gabby on, that have been very positive in terms of our spicy lamb meatballs and avocado that highlighted in those is an example of one of those bracketed seasonal moments. And then certainly leveraging the success of our flavor innovation Pita Chips as a platform, you could imagine another flavor innovation on the Pita Chip front. But more to come in the coming months. We're excited to bring some new news. But in the stage gate test process now, but would expect the same kind of sequence that you saw last year?

That's helpful. And then separately, I just wanted to touch on the topic of relative value and I think you've said in the past that CAVA sort of operates in this sweet spot in terms of price points and that's kind of helped take share of occasions from both fast food and some casual dining as well. How are you thinking about that dynamic for this year, particularly as we're seeing others get more sharper on price points and some trade down still occurring. Any color would be helpful. Yes. Continuing with that philosophy, now that we've turned the page on 2024, when you look at the timeframe from the end of twenty nineteen to the end of twenty twenty four, in aggregate, our price increases have amounted to 15%. CPI was almost 23% during that time period. So we underpriced inflation by eight points. You look at the Department of Labor Statistics, traditional fast food QSR is upwards of the mid-30s. So we're not even half of that price increase. We which certainly has amplified our value proposition from a price standpoint.

In 2025, Tricia spoke to our 1.7%.

Which is under expected CPI for this year and what we've already seen some peers take. So working on behalf of our guests, investing in our guests, driving that value proposition, not just from a price point, but again, how we view value, that combination of factors the quality of the ingredients we source, the relevance of med training cuisine, again ranked number one diet, The convenience of the multichannel format that our guests can opt into their channel choice on their terms, The experience we deliver, I talked in the prepared remarks about the importance of human connection 64% of our guests come in and they want to engage with our team members. And the ability for our team members to connect deliver that Mediterranean hospitality they're having that experience, you'll walk the line experience and smelling the food, tasting or seeing the food and hearing it cook, is powerful. And I think all that comes together that bang for the buck to really be capturing whether it's folks trading down from a legacy casual dining experience and sharing a meal in our dining room like we've talked about the Project Soul investments or trading up from traditional QSR for $1 to more or something [indiscernible] and then trading over from other players in the space that we're clearly resonating with the modern consumer with what we're able to deliver.

And so we continue to lean into that this year.

Your next question comes from the line of Brian Mulan from Piper Sandler. Please go ahead.

Thank you. Question on the catering sales channel. Can you talk about what for catering this year, what you'll be evaluating and I'm wondering if if 2026 might be a year where you push forward with catering in bigger way? Any update would be great.

Yes. Thanks for the question. We're very excited about the catering I think we've catered most professional sports teams this point, many college teams, let alone offices and schools. And And what we're finding is the demand is clearly there. What we want to make sure is we get the packaging right, the technology right on our self-service site and complement to our Hi Touch Catering sales team, And so we're going to expand the test this year to a major metro market test. We're going to take a whole major market we're going to be testing the different production support, whether that's our hybrid kitchens, our digital kitchens, the centralized hubs in concert with regular restaurants to really truly understand the capacity of the regular Kava restaurants in concert with the hub production while we parallel path the new packaging and the new self-service site, to position ourselves for a national launch not this year, certainly not the beginning of twenty twenty six, but as we see the teams progress on the test and regain greater confidence that this is ready for prime time and we're setting our operators up for success, and to be able to deliver on those commitments from a catering experience.

We'll be excited to bring this across the country in the future.

Okay. Thank you. Your next question is from the line of Jeffrey Bernstein from Barclays. Please go ahead.

Great. Thank you very much.

The EBITDA growth obviously incredible in 2024 and you're looking for obviously outsized growth in 2025. As I look at '25, based on your guidance, it looks like you're expecting maybe 19% to 24% growth.

I compare that to your long term outlook, I think you've talked about mid to high 20s. So just curious just because it is below consensus and maybe below the long term Algo Just wondering what the puts and takes are especially because the comps like looks like you're talking about 6% to 8% that would be above kind of your long term plan, Unit growth is in line. So wondering where you see the greatest differential, what line items maybe see the greatest leverage or deleverage relative to that long term thought process?

Thanks for the question. So certainly as we look at the opportunity that lies ahead, we feel very good about our long term algorithm. But we're looking at from '24 to 25 is really anniversaring very outsized growth in 2024. And the investments we're making in the business to drive the results over the long term. So while you might see some modest adjustments in a shorter term horizon, there's nothing that leads us to believe that the long term algorithm is not fully intact. Super powerful. Our top quartile of Resh [indiscernible] we want to make sure that we're making the right investments leaning into the right things, but this stage of our growth. So that we're positioning the business for Great. Thank you.

Your next question comes from the line of Danilo Gergula from Bernstein. Please go ahead.

Thank you.

So I wonder if you can talk about the puts and takes of Hintra sales guidance, especially the lower range of your SIMS or sales expectations to be mid single digits And how do you think about the drivers of your guidance between traffic and mix in '25 Yes. Thank you. So when we think about same restaurant sales, we have to consider the dynamic performance we've experienced over the past few years. And we believe the best way to think about same restaurant sales on a normalized basis is to look at it in a three year Zach. When you're looking at the three year stack, we anticipate it to be in the high 30s in 2025, we expect a higher amount in Q1 and then moderating over Q2 three and '4 to deliver that to 8% same restaurant sales. And so within that same restaurant sales, we mentioned that price is 1.7%.

We don't anticipate taking any further price increases throughout 2025 and that really leaves traffic and perhaps very modest mix impact. So looking for robust traffic even on top of the strong results that we've delivered in 2024 and 2023.

Thank you. Andre, if you don't mind. As you're stepping back and looking at your organization and assessing growth readiness, which areas of your business do you think require disproportionate investment from today's levels? And what material outcomes are you expecting from these incremental investments? In other words, if you were to talk two years from now, what will be some of the big initiatives that you think you might be launching?

Yes. Thanks, Danilo. I feel very good about where we stand organizationally. I think that's something we've been very committed to throughout our journey is investing ahead of the growth. And investing in our infrastructure, whether it's our manufacturing, our technology, or our people. And last year, we announced the hiring of Jeff Goll, our Chief Development Officer, which was the last addition to our ELT.

That we've built over the last few years. And we've built across the organization. So whether it's Beth McCormick or Andy Revhan who joined us, the prior year in technology and marketing, we've made those investments not just at an executive level, but across all functions and teams. So feel pretty well balanced and positioned across the org as we invested ahead of growth to prepare for building this for the next decade. Not necessarily the next quarter. But the next decade and beyond. So I'd say no specific area of the business that would need outside [indiscernible] a people perspective.

Your next question comes from the line of Brian Vaccaro from Raymond James. Hi, thanks and good evening.

I just wanted to quickly follow-up on Danilo's question and not to harp on the near term too much, but just given what's been a softer weather impacted start the industry in 2025, Tricia, that three year comp thinking maybe through that lens do you expect to be in the high 30s in Q1 as well? I just wanted to make sure that I was clear on the message you were trying to deliver there. And then my question was, I think you used to disclose this historically, but could you level set us on where your AUVs are across different regions, however you break that down?

Thank you.

Yes. Thanks, Brian. So yes, we do anticipate our three years back in Q1 to be in the high 30s. So our business has been and continues to be strong and resilient and that strength is reflected in our guidance We've seen increases in premium attachment. We've seen strength in our lower income cohorts and the improvement in same restaurant sales that they've got. And so we've reflected all of that in the guidance to deliver that expected result in Q1 and for the rest of the year. And then when you talk about AUVs across the region, what we've seen that AUV growing from 2.6 to 2.9 is happening a all regions of the country. Northeast, Mid Atlantic, Southeast, Southwest and the West, all have significant increases from the last time that we shared that information. We view all of this in totality and so we haven't shared the specifics by region. But what I will say is each region has delivered year over year and quarter over quarter increases in AUV, which again under to more and more places across the country. Your last question is from the line of John Ivankoe from JPMorgan. Hi, thank you. The question is on KDS.

Obviously going from 25 units, I think, to two fifty units is a pretty big jump and really expresses your confidence in the system. So can you talk about I understand the accuracy, but can you talk about some of the speed of service benefit that that KDS might get? And as you put that system in, might it make sense in the relatively near future to have kiosks as part of the COVID experience for people that want to interact with the brand in store in a digital manner.

Hey, John, it's Brad. I know you love kiosk, but don't expect them to CAVA anytime soon. We believe in human interaction in our restaurants and if people want a kiosk type experience, they can download, open up the app and order on the app.

Feel very strongly about that.

Very excited about the KDS. The KDS what we've seen in the expanded test now in 25 restaurants, is the ability to increase productivity on the second make lines.

There is certainly an opportunity with the number of bowls we do every fifteen minutes to increase that productivity. Most importantly, we've seen an improvement in order accuracy an improvement in the customer experience.

So the last thing I'll say is we also have the ability now with the new KDS to be able to do order status updates if you opt into text notification, we can give you dynamic order status updates, your order has been received, your order is working, your order is ready and if for some reason the order is either ahead of time or behind time, we can give you a dynamic update that your order is now ready ahead of time or that it's running three or four minutes late, which certainly that visibility to the guests has improved the experience and customer satisfaction, which we're very excited and only to make the guest experience better, but also improve our team member experience and be able to managing productivity of those lines.

There are no further questions at this time. I'd like to turn the call over to Brad Schulman for closing remarks. Sir, please go ahead.

Thank you for joining us today. Before we wrap up, want to take a moment to express my gratitude to our entire team for an incredible 2024. Your dedication and passion make Kava a special place enabling the results that we have been consistently delivering. As we step into the New Year, we recognize that many have been affected by the California wildfires last month. Our thoughts are with those impacted and we remain committed to supporting in any way we can. We whether through our bold donations to first responders or affected guests, or direct assistance to our team members. Moments like these remind us why our mission matters, Heart health and humanity aren't just words. They're our mission that guides everything we do.

Together, we will continue to make a meaningful difference both inside and outside our restaurants. We look forward to speaking with you all on our next call. This concludes today's conference call. Thank you very much for your participation. May now disconnect.