investors-overview

Press Release Details

Shake Shack Announces Second Quarter 2021 Financial Results

08/05/2021

– Total Revenue Increased 104.2%, to $187.5 million, Supported by >300% In-Shack Sales Growth, versus Same Period Last Year

– Same-Shack Sales Up 52.7% Compared to Same Period Last Year

– Average Weekly Sales Showed Significant Improvement, at $72,000 in the Second Quarter and $74,000 in Fiscal July, Supported by Stronger Urban and In-Shack Sales

NEW YORK--(BUSINESS WIRE)-- Shake Shack Inc. (“Shake Shack” or the “Company”) (NYSE: SHAK) today reported its financial results for the second quarter ended June 30, 2021, a period that included 13 weeks.

Randy Garutti, Chief Executive Officer of Shake Shack, stated, “We remain on the path towards full sales recovery, with total revenue up over 104% versus the second quarter of 2020. As restrictions relaxed across the country, in-Shack sales rose more than 300% year on year. The resilience of our business can be seen through the ongoing revenue improvement in our hardest hit urban Shacks, while at the same time we retained the strong business we built in our suburban Shacks. Additionally, even as more of our guests came back to meet us in person, we still grew our digital business double digits and retained approximately 80% of the digital sales versus fiscal January 2021, when digital sales peaked. In terms of profitability, Shack level operating margin improved significantly along with sales, however, we do expect margins to moderate in the coming quarters as we make significant investments in our team. Our Shack team members are at the core of all we do and we have committed an additional $10 million in raises, incentives and leadership development over the next year. We remain focused on the recovery of both sales and profitability across our Shack base and growth over the long term. Our strategic plan centers on the evolution of our Shack formats through physical and digital transformation with the objective of delivering a seamless, elevated guest experience."

Financial Highlights for the Second Quarter of 2021:

  • Total revenue in the second quarter of 2021 increased 104.2% to $187.5 million versus the same period last year.
  • Shack sales in the second quarter of 2021 increased 102.7% to $181.5 million versus the same period last year.
  • Same-Shack sales(1) improved to up 52.7% in the second quarter of 2021 versus the same period last year.
  • Licensed revenue in the second quarter of 2021 increased 164.2% to $6.0 million versus the same period last year.
  • Shack system-wide sales in the second quarter of 2021 increased 127.7% to $281.9 million, versus the same period last year.
  • Operating income in the second quarter of 2021 was $3.3 million compared to an operating loss of $24.1 million in the same period last year.
  • Shack-level operating profit(2) increased 1,699.7% in the second quarter of 2021 versus the same period last year, to $34.8 million, or 19.2% of Shack sales.
  • Net income was $2.1 million and adjusted EBITDA(2) was $20.6 million in the second quarter of 2021, compared to a net loss of $18.0 million and adjusted EBITDA of $(8.8) million in the same period last year.
  • Net income attributable to Shake Shack Inc. was $1.9 million and adjusted pro forma net income(2) was $2.4 million, or $0.05 per fully exchanged and diluted share in the second quarter of 2021, compared to Net loss attributable to Shake Shack Inc. of $16.2 million and adjusted pro forma net loss of $18.3 million, or $(0.45) per fully exchanged and diluted share, in the same period last year.
  • Net system-wide Shack openings , comprised of eight net domestic Company-operated Shacks and ten net licensed Shacks.
  • Cash and cash equivalents and marketable securities on hand was $420.2 million as of June 30, 2021.

(1)

 

In order to compare like-for-like periods for fiscal 2021, same-Shack sales will compare the 52 weeks from December 31, 2020 through December 29, 2021 to the 52 weeks from January 2, 2020 through December 30, 2020. For Q2 2021, same-Shack sales compares the thirteen weeks from April 1, 2021 through June 30, 2021 to the thirteen weeks from April 2, 2020 through July 1, 2020. Refer to the materials included in the Supplemental Financial Information, dated August 5, 2021, for illustrative monthly and quarterly comparative periods.

(2)

 

Shack-level operating profit, adjusted EBITDA and adjusted pro forma net income (loss) are non-GAAP measures. Reconciliations of Shack-level operating profit to Operating income (loss) and adjusted EBITDA to Net income (loss), and adjusted pro-forma net income (loss) to Net income (loss) attributable to Shake Shack, Inc., the most directly comparable financial measures presented in accordance with GAAP, are set forth in the schedules accompanying this release. See “Non-GAAP Financial Measures.”

Second Quarter 2021 Review

Total revenue , which includes Shack sales and Licensing revenue, increased 104.2% versus the second quarter of 2020, to $187.5 million in the second quarter of 2021. Shack sales for the second quarter of 2021 were $181.5 million compared to $89.5 million in the second quarter of 2020, reflecting an increase of $92.0 million, or 102.7%, due in part to the opening of 29 net new domestic Company-operated Shacks between June 24, 2020 and June 30, 2021, as well as continued sales recovery across Shack markets.

Same-Shack sales grew 52.7% year-on-year in the second quarter of 2021, compared to up 5.7% in the first quarter of 2021. Sales improved across all regions, and was led by strength of in-Shack dining as well as healthy retention of our digital sales. These trends continued in fiscal July as we saw same-Shack sales up 38% compared to the same period last year. Although suburban Shacks are performing closer to pre-pandemic levels than urban, we saw encouraging momentum across urban Shacks throughout the second quarter. We also reached a milestone in our urban recovery, with the reopening of the Union Station, DC and Grand Central Station, NYC Shacks in late June and early July, respectively. In the Southeast region, notably Texas, same-Shack sales are now above pre-pandemic levels; these markets continue to represent growth opportunities for the business across a variety of formats.

Average weekly sales were $72,000 in the second quarter of 2021, marking the highest level since the pandemic started, and up from $64,000 in the first quarter of 2021. Average weekly sales grew each month of the second quarter of 2021 and were $74,000 in fiscal July.

During the second quarter of 2021, total digital sales, including orders placed on the Shake Shack app, website and third-party delivery platforms, represented 47% of Shack sales. Even as the mix shifted with the return of in-Shack dining, retention of digital sales was approximately 80% in fiscal June when compared to fiscal January when digital sales peaked, with the Company-owned app channel performing higher than our digital average. During the second quarter of 2021 our new purchasers in Company-owned app and web channels grew 16.7% versus the first quarter of 2021, to 2.8 million total new purchasers since mid-March of 2020; continued investment across these channels is helping bring in new guests, even as in-Shack dining returns. We look forward to continuing to build on this strong foundation by offering our guests new and innovative ways to elevate their dining experience.

Licensing revenue for the second quarter of 2021 was $6.0 million, reflecting an increase of 164.2% versus the same period last year. Improvement was driven domestically by the return of air travel across airports and gradual lifting of capacity restrictions at major US stadiums; internationally, improvement was seen across the regions where COVID-related restrictions have been eased.

Operating income for the second quarter of 2021 was $3.3 million, or a positive operating margin of 1.8%, compared to Operating loss of $24.1 million, or an operating loss margin of 26.2% for the second quarter of 2020. For the second quarter of 2021, Shack-level operating profit, a non-GAAP measure, was $34.8 million, or 19.2% as a percentage of Shack sales, compared to Shack-level operating profit of $22.6 million, or 15.0% of Shack sales in the first quarter of 2021. This increase versus the first quarter of 2021 was primarily the result of better than expected recovery of in-Shack traffic as well as strong digital retention. A reconciliation of Shack-level operating profit to operating income (loss), the most directly comparable GAAP financial measure, is set forth in the schedules accompanying this release. See “Non-GAAP Financial Measures.”

  • General and administrative expenses increased to $20.4 million in the second quarter of 2021 from $14.0 million in the second quarter of 2020. The second quarter of 2021 includes $2.0 million of equity-based compensation and other non-cash items. This increase was primarily due to continued investment across the business, as we are committed to investing in our people, marketing and technology. The investments across these initiatives will help support our recovery and the increase in our new Shack pipeline. As a percentage of total revenue, General and administrative expenses decreased to 10.9% for the second quarter of 2021 from 15.3% in the second quarter of 2020.

Development Highlights

During the second quarter of 2021, the Company opened eight new domestic Company-operated Shacks and ten new licensed Shacks. There were no permanent Shack closures in the second quarter of 2021.

Location

 

Type

 

Opening Date

Bronx, NY — Bay Plaza

 

Domestic Company-operated

 

4/1/2021

Seoul, South Korea — Nowon

 

International Licensed

 

4/2/2021

Los Angeles, CA — Dodger Stadium

 

Domestic Licensed

 

4/9/2021

Mexico City, Mexico — Roma Cibeles

 

International Licensed

 

4/14/2021

Beaverton, OR — Cedar Hills

 

Domestic Company-operated

 

4/16/2021

Macao, China — The Londoner

 

International Licensed

 

4/17/2021

Santa Monica, CA — Santa Monica

 

Domestic Company-operated

 

4/18/2021

Los Angeles, CA — Bunker Hill

 

Domestic Company-operated

 

4/19/2021

Fishers, IN — Fishers

 

Domestic Company-operated

 

4/22/2021

Beijing, China — China World

 

International Licensed

 

4/26/2021

Singapore, Singapore — Great World

 

International Licensed

 

4/28/2021

Shenzhen, China — MixC

 

International Licensed

 

5/20/2021

Kuwait City, Kuwait — 360 Mall

 

International Licensed

 

6/1/2021

Istanbul, Turkey — Istanbul Airport

 

International Licensed

 

6/4/2021

Tampa, FL — Midtown Tampa

 

Domestic Company-operated

 

6/7/2021

Seoul, South Korea — Coex Mall

 

International Licensed

 

6/9/2021

San Francisco, CA — San Francisco Centre

 

Domestic Company-operated

 

6/28/2021

Franklin, TN — Franklin

 

Domestic Company-operated

 

6/28/2021

In fiscal July 2021, the Company opened one additional domestic Company-operated Shack.

Fiscal 2021 Outlook

The Company is providing revenue and sales guidance for the third quarter of 2021.

 

Current Q3 2021 Outlook

Total revenue

$194 million to $200 million

Shack sales

$188 million to $193 million

Licensing revenue

$6 million to $7 million

Same-Shack sales versus 2020

+ mid to high 20s%

Shack-level operating profit margin

15% to 17%

Given the substantial uncertainty and resulting material economic impact caused by the COVID-19 pandemic, the Company is not providing full guidance for the fiscal year ending December 29, 2021, but is updating full year Shack openings and expense guidance from the ranges provided earlier this year.

 

Current 2021 Outlook

Domestic Company-operated Shack openings

35 to 38

Licensed Shack openings (gross)

20 to 25

Total General and administrative expenses(1)

$86 million to $88 million

Equity-based compensation

approximately $9 million

Depreciation expense

$60 million to $63 million

Pre-opening costs

$13 million to $14 million

(1)

Includes approximately $8 million of the approximately $9 million total Equity-based compensation.

Earnings Conference Call

As previously announced, the Company will host a conference call to discuss its second quarter 2021 financial results today at 5:00 p.m. ET.

The conference call can be accessed live over the phone by dialing (877) 407-0792, or for international callers by dialing (201) 689-8263. A replay of the call will be available until August 12, 2021 by dialing (844) 512-2921 or for international callers by dialing (412) 317-6671; the passcode is 13720728.

The live audio webcast of the conference call will be accessible in the Events & Presentations section on the Company's Investor Relations website at investor.shakeshack.com. An archived replay of the webcast will also be available shortly after the live event has concluded.

Definitions

The following definitions apply to these terms as used in this release:

"Shack sales" is defined as the aggregate sales of food, beverages and Shake Shack branded merchandise at domestic Company-operated Shacks and excludes sales from licensed Shacks.

"Same-Shack sales" represents Shack sales for the comparable Shack base, which is defined as the number of domestic Company-operated Shacks open for 24 full fiscal months or longer. For days that Shacks were temporarily closed, the comparative prior period was also adjusted.

"Average weekly sales" is calculated by dividing total Shack sales by the number of operating weeks for all Shacks in operation during the period. For Shacks that are not open for the entire period, fractional adjustments are made to the number of operating weeks open such that it corresponds to the period of associated sales.

"Shack-level operating profit," a non-GAAP measure, is defined as Shack sales less Shack-level operating expenses including Food and paper costs, Labor and related expenses, Other operating expenses and Occupancy and related expenses.

"Shack-level operating profit margin," a non-GAAP measure, is defined as Shack sales less Shack-level operating expenses including Food and paper costs, Labor and related expenses, Other operating expenses and Occupancy and related expenses as a percentage of Shack sales.

“EBITDA,” a non-GAAP measure, is defined as Net income (loss) before interest expense (net of interest income), Income tax expense (benefit), and Depreciation and amortization expense.

“Adjusted EBITDA,” a non-GAAP measure, is defined as EBITDA (as defined above), excluding equity-based compensation expense, deferred lease costs, Impairment and loss on disposal of assets, amortization of cloud-based software implementation costs, as well as certain non-recurring items that the Company does not believe directly reflect its core operations and may not be indicative of the Company's recurring business operations.

“Adjusted EBITDA margin,” a non-GAAP measure, is defined as EBITDA (as defined above), excluding equity-based compensation expense, deferred lease costs, impairment and loss on disposal of assets, amortization of cloud-based software implementation costs, as well as certain non-recurring items that the Company does not believe directly reflect its core operations, as a percentage of revenue.

"Adjusted pro forma net income," a non-GAAP measure, represents Net income (loss) attributable to Shake Shack Inc. assuming the full exchange of all outstanding SSE Holdings, LLC membership interests ("LLC Interests") for shares of Class A common stock, adjusted for certain non-recurring and other items that the Company does not believe directly reflect its core operations.

About Shake Shack

Shake Shack is a modern day "roadside" burger stand serving a classic American menu of premium burgers, chicken sandwiches, hot dogs, crinkle cut fries, shakes, frozen custard, beer and wine. With its fresh, simple, high-quality food at a great value, Shake Shack is a fun and lively community gathering place with widespread appeal. Shake Shack’s mission is to Stand for Something Good®, from its premium ingredients and caring hiring practices to its inspiring designs and deep community investment. Since the original Shack opened in 2004 in NYC’s Madison Square Park, the Company has expanded to approximately 220 domestic locations in 32 U.S. States and the District of Columbia and more than 100 international locations including London, Hong Kong, Shanghai, Singapore, Philippines, Mexico, Istanbul, Dubai, Tokyo, Seoul and more.

Forward-Looking Statements

This press release contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"), which are subject to known and unknown risks, uncertainties and other important factors that may cause actual results to be materially different from the statements made herein. All statements other than statements of historical fact included in this press release are forward-looking statements, including, but not limited to, expected financial outlook and operating performance for fiscal 2021, including guidance for the third quarter and full year 2021, expected Shack openings, expected Same-Shack sales growth, sales opportunities and trends in the Company’s operations. Forward-looking statements discuss the Company's current expectations and projections relating to its financial position, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "aim," "anticipate," "believe," "estimate," "expect," "forecast," "future," "intend," "outlook," "potential," "project," "projection," "plan," "seek," "may," "could," "would," "will," "should," "can," "can have," "likely," the negatives thereof and other similar expressions. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. Some of the factors which could cause results to differ materially from the Company's expectations include the continuing impact of the COVID-19 pandemic, including the potential impact of any COVID-19 variants, the Company's ability to develop and open new Shacks on a timely basis, the Company's management of its digital capabilities and expansion into delivery, and risks relating to the restaurant industry generally. You should evaluate all forward-looking statements made in this press release in the context of the risks and uncertainties disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2020 filed with the Securities and Exchange Commission ("SEC"). All of the Company's SEC filings are available online at www.sec.gov, www.shakeshake.com or upon request from Shake Shack Inc. The forward-looking statements included in this press release are made only as of the date hereof. The Company undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

SHAKE SHACK INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
(in thousands, except per share amounts)

 

 

 

Thirteen Weeks Ended

 

Twenty-Six Weeks Ended

 

 

 

June 30
2021

 

June 24
2020

 

June 30
2021

 

June 24
2020

Shack sales

$

181,470

 

96.8

%

 

$

89,519

 

97.5

%

 

$

332,138

 

96.9

%

 

$

227,567

 

96.9

%

Licensing revenue

5,990

 

3.2

%

 

2,267

 

2.5

%

 

10,604

 

3.1

%

 

7,389

 

3.1

%

TOTAL REVENUE

187,460

 

100.0

%

 

91,786

 

100.0

%

 

342,742

 

100.0

%

 

234,956

 

100.0

%

Shack-level operating expenses(1):

 

 

 

 

 

 

 

 

 

 

 

 

Food and paper costs

54,917

 

30.3

%

 

30,027

 

33.5

%

 

99,547

 

30.0

%

 

69,591

 

30.6

%

 

Labor and related expenses

52,631

 

29.0

%

 

30,933

 

34.6

%

 

99,013

 

29.8

%

 

72,699

 

31.9

%

 

Other operating expenses

24,275

 

13.4

%

 

14,304

 

16.0

%

 

47,419

 

14.3

%

 

32,083

 

14.1

%

 

Occupancy and related expenses

14,876

 

8.2

%

 

12,323

 

13.8

%

 

28,787

 

8.7

%

 

24,881

 

10.9

%

General and administrative expenses

20,366

 

10.9

%

 

14,017

 

15.3

%

 

39,931

 

11.7

%

 

30,208

 

12.9

%

Depreciation and amortization expense

14,472

 

7.7

%

 

12,089

 

13.2

%

 

28,198

 

8.2

%

 

23,857

 

10.2

%

Pre-opening costs

2,258

 

1.2

%

 

1,734

 

1.9

%

 

5,834

 

1.7

%

 

3,977

 

1.7

%

Impairment and loss on disposal of assets

358

 

0.2

%

 

434

 

0.5

%

 

727

 

0.2

%

 

2,522

 

1.1

%

TOTAL EXPENSES

184,153

 

98.2

%

 

115,861

 

126.2

%

 

349,456

 

102.0

%

 

259,818

 

110.6

%

OPERATING INCOME (LOSS)

3,307

 

1.8

%

 

(24,075)

 

(26.2)

%

 

(6,714)

 

(2.0)

%

 

(24,862)

 

(10.6)

%

Other income, net

108

 

0.1

%

 

394

 

0.4

%

 

139

 

%

 

301

 

0.1

%

Interest expense

(359)

 

(0.2)

%

 

(442)

 

(0.5)

%

 

(874)

 

(0.3)

%

 

(554)

 

(0.2)

%

INCOME (LOSS) BEFORE INCOME TAXES

3,056

 

1.6

%

 

(24,123)

 

(26.3)

%

 

(7,449)

 

(2.2)

%

 

(25,115)

 

(10.7)

%

Income tax expense (benefit)

991

 

0.5

%

 

(6,092)

 

(6.6)

%

 

(10,089)

 

(2.9)

%

 

(6,005)

 

(2.6)

%

NET INCOME (LOSS)

2,065

 

1.1

%

 

(18,031)

 

(19.6)

%

 

2,640

 

0.8

%

 

(19,110)

 

(8.1)

%

Less: Net income (loss) attributable to non-controlling interests

121

 

0.1

%

 

(1,820)

 

(2.0)

%

 

(613)

 

(0.2)

%

 

(1,939)

 

(0.8)

%

NET INCOME (LOSS) ATTRIBUTABLE TO SHAKE SHACK INC.

$

1,944

 

1.0

%

 

$

(16,211)

 

(17.7)

%

 

$

3,253

 

0.9

%

 

$

(17,171)

 

(7.3)

%

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share of Class A common stock:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.05

 

 

 

$

(0.43)

 

 

 

$

0.08

 

 

 

$

(0.48)

 

 

 

Diluted

$

0.05

 

 

 

$

(0.43)

 

 

 

$

0.06

 

 

 

$

(0.48)

 

 

Weighted-average shares of Class A common stock outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

39,114

 

 

 

37,309

 

 

 

39,031

 

 

 

35,876

 

 

 

Diluted

43,789

 

 

 

37,309

 

 

 

43,289

 

 

 

35,876

 

 

(1)

As a percentage of Shack sales.

SHAKE SHACK INC.
SELECTED BALANCE SHEET DATA AND OPERATING DATA
(UNAUDITED)

(in thousands)

June 30
2021

 

December 30
2020

SELECTED BALANCE SHEET DATA:

 

 

 

Cash and cash equivalents

$

340,103

 

 

$

146,873

 

Marketable securities

$

80,105

 

 

$

36,887

 

Total assets

$

1,432,267

 

 

$

1,145,348

 

Total liabilities

$

988,735

 

 

$

710,855

 

Total equity

$

443,532

 

 

$

434,493

 

 

 

Thirteen Weeks Ended

 

Twenty-Six Weeks Ended

(dollar amounts in thousands)

June 30
2021

 

June 24
2020

 

June 30
2021

 

June 24
2020

SELECTED OPERATING DATA:

 

 

 

 

 

 

 

Same-Shack sales growth (decline)

52.7

%

 

(49.0)

%

 

26.4

%

 

(31.3)

%

Shacks in the comparable base

130

 

 

95

 

 

132

 

 

95

 

 

 

 

 

 

 

 

 

 

Shack system-wide sales(1)

$

281,893

 

 

$

123,789

 

 

$

510,198

 

 

$

345,370

 

 

 

 

 

 

 

 

 

Average weekly sales

 

 

 

 

 

 

 

 

Domestic Company-operated

$

72

 

 

$

45

 

 

$

68

 

 

$

55

 

 

 

 

 

 

 

 

 

Shack-level operating profit(2)

$

34,771

 

 

$

1,932

 

 

$

57,372

 

 

$

28,313

 

Shack-level operating profit margin(2)

19.2

%

 

2.2

%

 

17.3

%

 

12.4

%

 

 

 

 

 

 

 

 

Adjusted EBITDA(2)

$

20,645

 

 

$

(8,834)

 

 

$

27,779

 

 

$

5,430

 

Adjusted EBITDA margin(2)

11.0

%

 

(9.6)

%

 

8.1

%

 

2.3

%

 

 

 

 

 

 

 

 

 

Capital expenditures

$

21,554

 

 

$

18,478

 

 

$

44,709

 

 

$

37,637

 

 

 

 

 

 

 

 

 

 

Shack counts (at end of period):

 

 

 

 

 

 

 

 

System-wide

339

 

 

292

 

 

339

 

 

292

 

 

Domestic Company-operated

200

 

 

171

 

 

200

 

 

171

 

 

Domestic licensed

23

 

 

22

 

 

23

 

 

22

 

 

International licensed

116

 

 

99

 

 

116

 

 

99

 

(1)

Shack system-wide sales is an operating measure and consists of sales from domestic Company-operated Shacks, domestic licensed Shacks and international licensed Shacks. The Company does not recognize the sales from licensed Shacks as revenue. Of these amounts, revenue is limited to Shack sales from domestic Company-operated Shacks and licensing revenue based on a percentage of sales from domestic and international licensed Shacks, as well as certain up-front fees such as territory fees and opening fees.

(2)

Shack-level operating profit and adjusted EBITDA are non-GAAP measures. Reconciliations of Shack-level operating profit to Operating income (loss) and adjusted EBITDA to Net income (loss), the most directly comparable financial measures presented in accordance with GAAP, are set forth in the schedules accompanying this release. See “Non-GAAP Financial Measures.”

SHAKE SHACK INC.
NON-GAAP FINANCIAL MEASURES
(UNAUDITED)

To supplement the consolidated financial statements, which are prepared and presented in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company uses the following non-GAAP financial measures: Shack-level operating profit, Shack-level operating profit margin, EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted pro forma net income (loss) and adjusted pro forma earnings (loss) per fully exchanged and diluted share (collectively the "non-GAAP financial measures").

Shack-Level Operating Profit

Shack-level operating profit is defined as Shack sales less Shack-level operating expenses including Food and paper costs, Labor and related expenses, Other operating expenses and Occupancy and related expenses.

How This Measure Is Useful

When used in conjunction with GAAP financial measures, Shack-level operating profit and Shack-level operating profit margin are supplemental measures of operating performance that the Company believes are useful measures to evaluate the performance and profitability of its Shacks. Additionally, Shack-level operating profit and Shack-level operating profit margin are key metrics used internally by management to develop internal budgets and forecasts, as well as assess the performance of its Shacks relative to budget and against prior periods. It is also used to evaluate employee compensation as it serves as a metric in certain performance-based employee bonus arrangements. The Company believes presentation of Shack-level operating profit and Shack-level operating profit margin provides investors with a supplemental view of its operating performance that can provide meaningful insights to the underlying operating performance of the Shacks, as these measures depict the operating results that are directly impacted by the Shacks and exclude items that may not be indicative of, or are unrelated to, the ongoing operations of the Shacks. It may also assist investors to evaluate the Company's performance relative to peers of various sizes and maturities and provides greater transparency with respect to how management evaluates the business, as well as the financial and operational decision-making.

Limitations of the Usefulness of this Measure

Shack-level operating profit and Shack-level operating profit margin may differ from similarly titled measures used by other companies due to different methods of calculation. Presentation of Shack-level operating profit and Shack-level operating profit margin 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. Shack-level operating profit excludes certain costs, such as General and administrative expenses and Pre-opening costs, which are considered normal, recurring cash operating expenses and are essential to support the operation and development of the Company's Shacks. Therefore, this measure may not provide a complete understanding of the Company's operating results as a whole and Shack-level operating profit and Shack-level operating profit margin should be reviewed in conjunction with the Company's GAAP financial results. A reconciliation of Shack-level operating profit to Operating income (loss), the most directly comparable GAAP financial measure, is set forth below.

 

 

Thirteen Weeks Ended

 

Twenty-Six Weeks Ended

(dollar amounts in thousands)

June 30
2021

 

June 24
2020

 

June 30
2021

 

June 24
2020

Operating income (loss)

$

3,307

 

 

$

(24,075)

 

 

$

(6,714)

 

 

$

(24,862)

 

Less:

 

 

 

 

 

 

 

 

Licensing revenue

5,990

 

 

2,267

 

 

10,604

 

 

7,389

 

Add:

 

 

 

 

 

 

 

 

General and administrative expenses

20,366

 

 

14,017

 

 

39,931

 

 

30,208

 

 

Depreciation and amortization expense

14,472

 

 

12,089

 

 

28,198

 

 

23,857

 

 

Pre-opening costs

2,258

 

 

1,734

 

 

5,834

 

 

3,977

 

 

Impairment and loss on disposal of assets(1)

358

 

 

434

 

 

727

 

 

2,522

 

Shack-level operating profit

$

34,771

 

 

$

1,932

 

 

$

57,372

 

 

$

28,313

 

 

 

 

 

 

 

 

 

 

Total revenue

$

187,460

 

 

$

91,786

 

 

$

342,742

 

 

$

234,956

 

Less: Licensing revenue

5,990

 

 

2,267

 

 

10,604

 

 

7,389

 

Shack sales

$

181,470

 

 

$

89,519

 

 

$

332,138

 

 

$

227,567

 

 

 

 

 

 

 

 

 

 

Shack-level operating profit margin (2)

19.2

%

 

2.2

%

 

17.3

%

 

12.4

%

(1)

For the twenty-six weeks ended June 24, 2020, amount includes a non-cash impairment charge of $1.1 million related to one Shack.

(2)

As a percentage of Shack sales.

SHAKE SHACK INC.
NON-GAAP FINANCIAL MEASURES
(UNAUDITED)

EBITDA and Adjusted EBITDA

EBITDA is defined as Net income (loss) before interest expense (net of interest income), Income tax expense (benefit) and Depreciation and amortization expense. Adjusted EBITDA is defined as EBITDA (as defined above) excluding equity-based compensation expense, deferred lease costs, Impairment and loss on the disposal of assets, amortization of cloud-based software implementation costs, as well as certain non-recurring items that the Company does not believe directly reflect its core operations and may not be indicative of the Company's recurring business operations.

How These Measures Are Useful

When used in conjunction with GAAP financial measures, EBITDA and adjusted EBITDA are supplemental measures of operating performance that the Company believes are useful measures to facilitate comparisons to historical performance and competitors' operating results. Adjusted EBITDA is a key metric used internally by management to develop internal budgets and forecasts and also serves as a metric in its performance-based equity incentive programs and certain bonus arrangements. The Company believes presentation of EBITDA and adjusted EBITDA provides investors with a supplemental view of the Company's operating performance that facilitates analysis and comparisons of its ongoing business operations because they exclude items that may not be indicative of the Company's ongoing operating performance.

Limitations of the Usefulness of These Measures

EBITDA and adjusted EBITDA may differ from similarly titled measures used by other companies due to different methods of calculation. Presentation of EBITDA and adjusted EBITDA 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. EBITDA and adjusted EBITDA exclude certain normal recurring expenses. Therefore, these measures may not provide a complete understanding of the Company's performance and should be reviewed in conjunction with the GAAP financial measures. A reconciliation of EBITDA and adjusted EBITDA to Net income (loss) the most directly comparable GAAP measure, is as follows.

 

 

Thirteen Weeks Ended

 

Twenty-Six Weeks Ended

(dollar amounts in thousands)

June 30
2021

 

June 24
2020

 

June 30
2021

 

June 24
2020

Net income (loss)

$

2,065

 

 

$

(18,031)

 

 

$

2,640

 

 

$

(19,110)

 

Depreciation and amortization expense

14,472

 

 

12,089

 

 

28,198

 

 

23,857

 

Interest expense, net

359

 

 

442

 

 

874

 

 

554

 

Income tax expense (benefit)

991

 

 

(6,092)

 

 

(10,089)

 

 

(6,005)

 

EBITDA

17,887

 

 

(11,592)

 

 

21,623

 

 

(704)

 

 

 

 

 

 

 

 

 

 

Equity-based compensation

1,958

 

 

1,419

 

 

3,639

 

 

2,719

 

Amortization of cloud-based software implementation costs(1)

314

 

 

368

 

 

627

 

 

628

 

Deferred lease costs(2)

(75)

 

 

479

 

 

129

 

 

149

 

Impairment and loss on disposal of assets(3)

358

 

 

434

 

 

727

 

 

2,522

 

Debt offering related costs(4)

 

 

 

 

236

 

 

 

Legal settlement(5)

24

 

 

 

 

619

 

 

 

Executive transition costs(6)

179

 

 

34

 

 

179

 

 

68

 

Project Concrete(7)

 

 

24

 

 

 

 

(237)

 

Other(8)

 

 

 

 

 

 

285

 

Adjusted EBITDA

$

20,645

 

 

$

(8,834)

 

 

$

27,779

 

 

$

5,430

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA margin(9)

11.0

%

 

(9.6)

%

 

8.1

%

 

2.3

%

(1)

 

Represents amortization of capitalized implementation costs related to cloud-based software arrangements that are included within General and administrative expenses.

(2)

 

Reflects the extent to which lease expense is greater than or less than contractual fixed base rent.

(3)

 

Includes losses on disposals of property and equipment in the normal course of business. For the twenty-six weeks ended June 24, 2020, this amount includes a non-cash impairment charge of $1.1 million related to one Shack.

(4)

 

Costs incurred in connection with the Company’s Convertible Notes, issued in March 2021, including consulting and advisory fees.

(5)

 

Expense incurred to establish an accrual related to the settlement of a legal matter.

(6)

 

Represents fees paid in connection with the search and hiring of certain executive and key management positions.

(7)

 

Represents consulting and advisory fees related to the Company's enterprise-wide system upgrade initiative called Project Concrete.

(8)

 

Represents incremental expenses incurred related to an inventory adjustment and certain employee-related expenses.

(9)

 

Calculated as a percentage of total revenue, which was $187,460 and $342,742 for the thirteen and twenty-six weeks ended June 30, 2021, respectively, and $91,786 and $234,956 for the thirteen and twenty-six weeks ended June 24, 2020, respectively.

Adjusted Pro Forma Net Income (Loss) and Adjusted Pro Forma Earnings (loss) Per Fully Exchanged and Diluted Share

Adjusted pro forma net income (loss) represents Net income (loss) attributable to Shake Shack Inc. assuming the full exchange of all outstanding SSE Holdings, LLC membership interests ("LLC Interests") for shares of Class A common stock, adjusted for certain non-recurring items that the Company does not believe are directly related to its core operations and may not be indicative of recurring business operations. Adjusted pro forma earnings (loss) per fully exchanged and diluted share is calculated by dividing adjusted pro forma net income (loss) by the weighted-average shares of Class A common stock outstanding, assuming the full exchange of all outstanding LLC Interests, after giving effect to the dilutive effect of outstanding equity-based awards.

How These Measures Are Useful

When used in conjunction with GAAP financial measures, adjusted pro forma net income (loss) and adjusted pro forma earnings (loss) per fully exchanged and diluted share are supplemental measures of operating performance that the Company believes are useful measures to evaluate performance period over period and relative to its competitors. By assuming the full exchange of all outstanding LLC Interests, the Company believes these measures facilitate comparisons with other companies that have different organizational and tax structures, as well as comparisons period over period because it eliminates the effect of any changes in Net income (loss) attributable to Shake Shack Inc. driven by increases in its ownership of SSE Holdings, which are unrelated to the Company's operating performance, and excludes items that are non-recurring or may not be indicative of ongoing operating performance.

Limitations of the Usefulness of These Measures

Adjusted pro forma net income (loss) and adjusted pro forma earnings (loss) per fully exchanged and diluted share may differ from similarly titled measures used by other companies due to different methods of calculation. Presentation of adjusted pro forma net income (loss) and adjusted pro forma earnings (loss) per fully exchanged and diluted share should not be considered alternatives to Net income (loss) and earnings (loss) per share, as determined under GAAP. While these measures are useful in evaluating the Company's performance, it does not account for the earnings attributable to the non-controlling interest holders and therefore does not provide a complete understanding of the Net income (loss) attributable to Shake Shack Inc. Adjusted pro forma net income (loss) and adjusted pro forma earnings (loss) per fully exchanged and diluted share should be evaluated in conjunction with GAAP financial results. A reconciliation of adjusted pro forma net income (loss) to Net income (loss) attributable to Shake Shack Inc., the most directly comparable GAAP measure, and the computation of adjusted pro forma earnings (loss) per fully exchanged and diluted share are set forth below.

 

 

 

Thirteen Weeks Ended

 

Twenty-Six Weeks Ended

(in thousands, except per share amounts)

June 30
2021

 

June 24
2020

 

June 30
2021

 

June 24
2020

Numerator:

 

 

 

 

 

 

 

 

Net income (loss) attributable to Shake Shack Inc.

$

1,944

 

 

$

(16,211)

 

 

$

3,253

 

 

$

(17,171)

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

Reallocation of net income attributable to non-controlling interests from the assumed exchange of LLC Interests(1)

121

 

 

(1,820)

 

 

(613)

 

 

(1,939)

 

 

 

Executive transition costs(2)

179

 

 

34

 

 

179

 

 

68

 

 

 

Project Concrete(3)

 

 

24

 

 

 

 

(237)

 

 

 

Legal settlement(4)

24

 

 

 

 

619

 

 

 

 

 

Debt offering related costs(5)

 

 

 

 

236

 

 

 

 

 

Revolving Credit Facility amendments related costs(6)

 

 

 

 

323

 

 

 

 

 

Income tax (expense) benefit(7)

112

 

 

(286)

 

 

136

 

 

1,533

 

 

 

Other(8)

 

 

 

 

 

 

285

 

 

Adjusted pro forma net income (loss)

$

2,380

 

 

$

(18,259)

 

 

$

4,133

 

 

$

(17,461)

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

Weighted-average shares of Class A common stock outstanding—diluted

43,789

 

 

37,309

 

 

43,289

 

 

35,876

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

Assumed exchange of LLC Interests for shares of Class A common stock(1)

 

 

3,117

 

 

 

 

3,131

 

 

Adjusted pro forma fully exchanged weighted-average shares of Class A common stock outstanding—diluted

43,789

 

 

40,426

 

 

43,289

 

 

39,007

 

 

 

 

 

 

 

 

 

 

 

Adjusted pro forma earnings (loss) per fully exchanged share—diluted

$

0.05

 

 

$

(0.45)

 

 

$

0.10

 

 

$

(0.45)

 

 

 

 

Thirteen Weeks Ended

 

Twenty-Six Weeks Ended

 

June 30
2021

 

June 24
2020

 

June 30
2021

 

June 24
2020

Earnings (loss) per share of Class A common stock - diluted

$

0.05

 

 

$

(0.43)

 

 

$

0.06

 

 

$

(0.48)

 

 

Assumed exchange of LLC Interests for shares of Class A common stock(1)

 

 

(0.01)

 

 

 

 

(0.01)

 

 

Non-GAAP adjustments(9)

 

 

(0.01)

 

 

0.04

 

 

0.04

 

Adjusted pro forma earnings (loss) per fully exchanged share—diluted

$

0.05

 

 

$

(0.45)

 

 

$

0.10

 

 

$

(0.45)

 

(1)

 

Assumes the exchange of all outstanding LLC Interests for shares of Class A common stock, resulting in the elimination of the non-controlling interest and recognition of the net income (loss) attributable to non-controlling interests.

(2)

 

Represents costs incurred in connection with our executive search, including fees paid to an executive recruiting firm.

(3)

 

Represents consulting and advisory fees related to our enterprise-wide system upgrade initiative called Project Concrete.

(4)

 

Expense incurred to establish an accrual related to the settlement of a legal matter.

(5)

 

Costs incurred in connection with the Company’s Convertible Notes, issued in March 2021, including consulting and advisory fees.

(6)

 

Expense incurred in connection with the Company's amendments on the Revolving Credit Facility, including the write-off of previously capitalized costs on the Revolving Credit Facility.

(7)

 

Represents the tax effect of the aforementioned adjustments and pro forma adjustments to reflect corporate income taxes at assumed effective tax rates of 27.0% and 167.8% for the thirteen and twenty-six weeks ended June 30, 2021, respectively, and 24.1% and 30.2% for the thirteen and twenty-six weeks ended June 24, 2020, respectively. Amounts include provisions for U.S. federal income taxes, certain LLC entity-level taxes and foreign withholding taxes, assuming the highest statutory rates apportioned to each applicable state, local and foreign jurisdiction. Additionally, the thirteen and twenty-six weeks ended June 24, 2020 includes the establishment of a valuation allowance.

(8)

 

Represents incremental expenses incurred related to an inventory adjustment and certain employee-related expenses.

(9)

 

Represents the per share impact of non-GAAP adjustments for each period. Refer to the reconciliation of Adjusted Pro Forma Net Income (Loss) above, for additional information.

 

Media:
Kristyn Clark, Shake Shack
(646) 747-8776
kclark@shakeshack.com

Investor Relations:
Melissa Calandruccio, ICR
Michelle Michalski, ICR
(844) SHACK-04 (844-742-2504)
investor@shakeshack.com

Source: Shake Shack Inc.