- Total Revenue Grew 29.1% to $99.1 Million -
- System-wide Year-Over-Year Unit Growth of 32% -
- Same-Shack Sales Increased 1.7% -
NEW YORK--(BUSINESS WIRE)--
Shake Shack Inc. (“Shake Shack” or the “Company”) (NYSE: SHAK)
today reported its financial results for the first quarter ended
March 28, 2018, a period that included 13 weeks.
Financial Highlights for the First Quarter 2018:
-
Total revenue increased 29.1% to $99.1 million.
-
Shack sales increased 29.6% to $96.1 million.
-
Same-Shack sales increased 1.7%.
-
Operating income increased 15.7% to $6.5 million, or 6.6% of total
revenue.
-
Shack-level operating profit*, a non-GAAP measure, increased 28.5% to
$24.0 million, or 25.0% of Shack sales.
-
Net income increased 28.9% to $5.0 million and net income attributable
to Shake Shack Inc. was $3.5 million, or $0.13 per diluted share.
-
Adjusted EBITDA*, a non-GAAP measure, increased 32.8% to $16.2 million.
-
Adjusted pro forma net income*, a non-GAAP measure, increased 54.0% to
$5.7 million, or $0.15 per fully exchanged and diluted share.
-
Nine system-wide Shack openings, comprising five domestic
company-operated Shacks and four licensed Shacks.
* Shack-level operating profit, adjusted EBITDA and adjusted pro
forma net income are non-GAAP measures. Reconciliations of Shack-level
operating profit to operating income, adjusted EBITDA to net income, and
adjusted pro forma net income to net income 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.”
Randy Garutti, Chief Executive Officer of Shake Shack, stated, “2018 is
off to a strong start as we built upon our fourth quarter momentum,
reporting another quarter of robust top and bottom-line growth. We
delivered year over year revenue growth of approximately 29%, including
a 1.7% increase in same-Shack sales and grew adjusted EBITDA by over
30%. These results were supported by the continued evolution of our
digital initiatives and the strength of new and existing Shacks as we
executed on our development plans."
Garutti concluded, "Our team is executing the plan to open 32 to 35 new
domestic company-operated Shacks in 2018, our biggest year of openings
to date. Our domestic pipeline is stronger than ever as we build towards
our goal of 200 domestic company-operated Shacks by the end of 2020 and
our long-term target of 450. We expect 16 to 18 net new licensed Shacks
for the year, with a focus on Asia including our first Shack in Hong
Kong which opened on May 1st . Additionally, we are committed to digital
innovation to better connect with our guests, delivering ongoing menu
innovation, and investing in our people and infrastructure to execute on
the significant long-term opportunity ahead."
Development Highlights
During the quarter, the Company opened five domestic company-operated
Shacks, including its first Shack in the RINo District in downtown
Denver, as well as additional Shacks in the existing markets of Houston,
LA, South Florida and New Jersey. The Company also opened four
international licensed Shacks; one in each of Saudi Arabia, South Korea
and two in Japan.
|
Location
|
|
Type
|
|
Opening Date
|
|
Riyadh, KSA — Riyadh Gallery
|
|
International Licensed
|
|
January 4
|
|
Incheon, South Korea — Incheon Airport
|
|
International Licensed
|
|
January 18
|
|
Tokyo, Japan — Tokyo Dome
|
|
International Licensed
|
|
February 1
|
|
Tokyo, Japan — Futako Tamagawa
|
|
International Licensed
|
|
February 28
|
|
Houston, TX — Rice Village
|
|
Domestic Company-Operated
|
|
February 28
|
|
Los Angeles, CA — Downtown LA
|
|
Domestic Company-Operated
|
|
March 9
|
|
Rino Denver, CO — RiNo
|
|
Domestic Company-Operated
|
|
March 21
|
|
Marlton, NJ — Marlton Common
|
|
Domestic Company-Operated
|
|
March 22
|
|
Aventura, FL — Aventura Mall
|
|
Domestic Company-Operated
|
|
March 23
|
Subsequent to the end of the quarter, the Company opened its first Shack
in Charlotte, North Carolina and its first Shack in Hong Kong at the IFC
Mall.
First Quarter 2018 Review
Total revenue, which includes Shack sales and licensing revenue,
increased 29.1% to $99.1 million in the first quarter of 2018, from
$76.7 million in the first quarter of 2017. Shack sales for the first
quarter of 2018 were $96.1 million compared to $74.2 million in the same
quarter last year, an increase of $21.9 million, or 29.6%, due primarily
to the opening of 24 new domestic company-operated Shacks, as well as
same-Shack sales growth. Licensing revenue for the first quarter was
$3.0 million, an increase of 16.7% from $2.6 million in the same quarter
last year, due primarily to the opening of new licensed Shacks, and the
strong performance of the Company's newer Shacks in South Korea and
Japan, balanced by continued softness in the Middle East.
Same-Shack sales increased 1.7% for the first quarter of 2018 versus a
2.5% decline in the first quarter last year. The increase in same-Shack
sales, consisted of a combined increase in price and sales mix of 5.9%
offset by a 4.2% decrease in guest traffic. Excluding all transactions
associated with the free burger promotion in the prior year, same-Shack
sales would have been 2.1% in the first quarter with traffic declining
by only 2.2%. The comparable Shack base includes those restaurants open
for 24 full fiscal months or longer. For the first quarter of 2018, the
comparable Shack base included 44 Shacks versus 32 Shacks for the first
quarter of 2017.
Average weekly sales for domestic company-operated Shacks decreased to
$81,000 for the first quarter of 2018 compared to $86,000 for the same
quarter last year, primarily due to the addition of Shacks at lower
volumes to the system.
Operating income increased 15.7% to $6.5 million for the first quarter
of 2018 from $5.6 million in the same quarter last year. Operating
income margins decreased 70 basis points to 6.6%. Shack-level operating
profit, a non-GAAP measure, increased 28.5% to $24.0 million for the
first quarter of 2018 from $18.7 million in the same quarter last year.
As a percentage of Shack sales, Shack-level operating profit margins
decreased 20 basis points to 25.0%. These decreases were primarily due
to increased labor and related expenses resulting from ongoing increases
in minimum wages, prior year costs associated with the free burger
promotion, offset in part by the menu price increase implemented at the
end of the prior year. A reconciliation of Shack-level operating profit
to operating income, 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 $11.8 million for the
first quarter of 2018 from $8.5 million in the same quarter last year.
The increase was primarily due to the addition of headcount to support
the Company's ongoing growth, technology development costs related to
its digital products and costs associated with the Company's new Home
Office. As a percentage of total revenue, general and administrative
expenses increased to 11.9% for the first quarter of 2018 from 11.0% in
the first quarter last year.
Net income attributable to Shake Shack Inc. was $3.5 million, or 3.5% of
total revenue, for the first quarter of 2018, compared to $2.3 million,
or 3.0% of total revenue, for the same period last year. Earnings per
diluted share was $0.13 for the first quarter of 2018 compared to $0.09
for the same period last year.
Adjusted EBITDA, a non-GAAP measure, increased 32.8% to $16.2 million.
As a percentage of total revenue, adjusted EBITDA margins increased
approximately 40 basis points to 16.3% compared to 15.9% for the year
ago period. A reconciliation of adjusted EBITDA to net income, the most
directly comparable GAAP financial measure, is set forth in the
schedules accompanying this release. See “Non-GAAP Financial Measures.”
Adjusted pro forma net income, a non-GAAP measure, increased 54.0% to
$5.7 million, or $0.15 per fully exchanged and diluted share
during the first quarter of 2018, compared to $3.7 million, or $0.10 per
fully exchanged and diluted share during the first quarter of 2017. A
reconciliation of adjusted pro forma net income to net income
attributable to Shake Shack Inc., the most directly comparable GAAP
financial measure, is set forth in the schedules accompanying this
release. See “Non-GAAP Financial Measures.”
Updated 2018 Outlook
For the fiscal year ending December 26, 2018, the Company is providing
the following financial outlook:
-
Total revenue between $446 million and $450 million (vs. $444 million
to $448 million).
-
Licensing revenue to be between $12 million and $13 million.
-
Same-Shack sales to be 0% to 1% year over year (vs. flat).
-
Between 32 and 35 new domestic company-operated Shacks to be opened in
fiscal 2018.
-
Between 16 and 18 net new licensed Shacks to be opened in fiscal 2018.
-
Average annual sales volume for total domestic company-operated Shacks
is expected to be between $4.1 million and $4.2 million.
-
Shack-level operating profit margin between 24.5% and 25.5%.
-
General and administrative expenses between $49 million and $51
million, excluding approximately $4 to $6 million of costs related to
Project Concrete, the Company's operational and financial systems
upgrade initiative.
-
Depreciation expense of approximately $32 million.
-
Pre-opening costs of between $12 million and $13 million.
-
Interest expense between $2.0 million and $2.2 million.
-
Adjusted pro forma effective tax rate between 26% and 27%.
Earnings Conference Call
As previously announced, the Company will host a conference call to
discuss its first quarter 2018 financial results today at 5:00 p.m. ET.
The conference call can be accessed live over the phone by dialing (800)
239-9838 or for international callers by dialing (323) 794-2551. A
replay will be available after the call and can be accessed by dialing
(844) 512-2921 or for international callers by dialing (412) 317-6671;
the passcode is 7153908. The replay will be available until May 10, 2018.
The conference call will also be webcast live from the Company's
Investor Relations website at http://investor.shakeshack.com.
An archive of the webcast will be available at the same location on the
website shortly after the call 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.
"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 before interest
expense (net of interest income), income tax expense, and depreciation
and amortization expense.
“Adjusted EBITDA,” a non-GAAP measure, is defined as EBITDA (as defined
above), excluding equity-based compensation expense, deferred rent
expense, losses on the disposal of property and equipment, 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 net income
before net interest, taxes, depreciation and amortization, which also
excludes equity-based compensation expense, deferred rent expense,
losses on the disposal of property and equipment, 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 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 directly reflect its core
operations.
About Shake Shack
Shake Shack is a modern day “roadside” burger stand known for its 100%
all-natural Angus beef burgers and flat-top vienna beef dogs (no added
hormones and no antibiotics ever), 100% all-natural cage-free chicken
(no antibiotics ever), spun-fresh frozen custard, crinkle cut fries,
craft beer and wine (available at select locations) and more. With its
fresh, simple, high-quality food at a great value, Shake Shack is a fun
and lively community gathering place with widespread appeal. From its
premium ingredients and caring hiring practices to its inspiring designs
and deep community investment, Shake Shack’s mission is to Stand For
Something Good®. Since the original Shack opened in 2004 in NYC’s
Madison Square Park, the company has opened multiple locations in 22
states and the District of Columbia, as well as international locations
including London, Istanbul, Dubai, Tokyo, Moscow, 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. 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 for fiscal
2018, expected Shack openings, expected same-Shack sales growth and
trends in the Company’s operations. Forward-looking statements discuss
the Company's current expectations and projections relating to their
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," "outlook," "potential,"
"project," "projection," "plan," "intend," "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. 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 27, 2017 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
(UNAUDITED)
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
|
|
|
March 28
|
|
March 29
|
|
|
|
|
|
2018
|
|
2017
|
|
Shack sales
|
|
|
$
|
96,089
|
|
|
96.9
|
|
%
|
|
$
|
74,155
|
|
|
96.6
|
|
%
|
|
Licensing revenue
|
|
|
|
3,027
|
|
|
3.1
|
|
%
|
|
|
2,594
|
|
|
3.4
|
|
%
|
|
TOTAL REVENUE
|
|
|
|
99,116
|
|
|
100.0
|
|
%
|
|
|
76,749
|
|
|
100.0
|
|
%
|
|
Shack-level operating expenses(1):
|
|
|
|
|
|
|
|
|
|
|
|
Food and paper costs
|
|
|
|
26,955
|
|
|
28.1
|
|
%
|
|
|
21,174
|
|
|
28.6
|
|
%
|
|
|
Labor and related expenses
|
|
|
|
26,687
|
|
|
27.8
|
|
%
|
|
|
20,460
|
|
|
27.6
|
|
%
|
|
|
Other operating expenses
|
|
|
|
10,759
|
|
|
11.2
|
|
%
|
|
|
7,665
|
|
|
10.3
|
|
%
|
|
|
Occupancy and related expenses
|
|
|
|
7,675
|
|
|
8.0
|
|
%
|
|
|
6,176
|
|
|
8.3
|
|
%
|
|
General and administrative expenses
|
|
|
|
11,809
|
|
|
11.9
|
|
%
|
|
|
8,470
|
|
|
11.0
|
|
%
|
|
Depreciation expense
|
|
|
|
6,498
|
|
|
6.6
|
|
%
|
|
|
4,748
|
|
|
6.2
|
|
%
|
|
Pre-opening costs
|
|
|
|
2,029
|
|
|
2.0
|
|
%
|
|
|
2,415
|
|
|
3.1
|
|
%
|
|
Loss on disposal of property and equipment
|
|
|
|
190
|
|
|
0.2
|
|
%
|
|
|
13
|
|
|
—
|
|
%
|
|
TOTAL EXPENSES
|
|
|
|
92,602
|
|
|
93.4
|
|
%
|
|
|
71,121
|
|
|
92.7
|
|
%
|
|
OPERATING INCOME
|
|
|
|
6,514
|
|
|
6.6
|
|
%
|
|
|
5,628
|
|
|
7.3
|
|
%
|
|
Other income, net
|
|
|
|
228
|
|
|
0.2
|
|
%
|
|
|
195
|
|
|
0.3
|
|
%
|
|
Interest expense
|
|
|
|
(565
|
)
|
|
(0.6
|
)
|
%
|
|
|
(303
|
)
|
|
(0.4
|
)
|
%
|
|
INCOME BEFORE INCOME TAXES
|
|
|
|
6,177
|
|
|
6.2
|
|
%
|
|
|
5,520
|
|
|
7.2
|
|
%
|
|
Income tax expense
|
|
|
|
1,198
|
|
|
1.2
|
|
%
|
|
|
1,658
|
|
|
2.2
|
|
%
|
|
NET INCOME
|
|
|
|
4,979
|
|
|
5.0
|
|
%
|
|
|
3,862
|
|
|
5.0
|
|
%
|
|
Less: net income attributable to non-controlling interests
|
|
|
|
1,471
|
|
|
1.5
|
|
%
|
|
|
1,595
|
|
|
2.1
|
|
%
|
|
NET INCOME ATTRIBUTABLE TO SHAKE SHACK INC.
|
|
|
$
|
3,508
|
|
|
3.5
|
|
%
|
|
$
|
2,267
|
|
|
3.0
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share of Class A common stock:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
0.13
|
|
|
|
|
$
|
0.09
|
|
|
|
|
|
Diluted
|
|
|
$
|
0.13
|
|
|
|
|
$
|
0.09
|
|
|
|
|
Weighted-average shares of Class A common stock outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
27,039
|
|
|
|
|
|
25,376
|
|
|
|
|
|
Diluted
|
|
|
|
27,822
|
|
|
|
|
|
25,955
|
|
|
|
|
________________
|
|
|
|
|
|
|
|
|
|
|
(1) As a percentage of Shack sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAKE SHACK INC.
SELECTED BALANCE SHEET DATA AND OPERATING DATA
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28
|
|
December 27
|
|
(in thousands)
|
|
|
2018
|
|
2017
|
|
SELECTED BALANCE SHEET DATA:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
26,624
|
|
|
$
|
21,507
|
|
|
Marketable securities
|
|
|
$
|
61,128
|
|
|
$
|
63,036
|
|
|
Total assets
|
|
|
$
|
500,294
|
|
|
$
|
470,606
|
|
|
Total liabilities
|
|
|
$
|
267,161
|
|
|
$
|
246,127
|
|
|
Total equity
|
|
|
$
|
233,133
|
|
|
$
|
224,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
|
|
March 28
|
|
March 29
|
|
(dollar amounts in thousands)
|
|
|
2018
|
|
2017
|
|
SELECTED OPERATING DATA:
|
|
|
|
|
|
|
Same-Shack sales growth
|
|
|
|
1.7
|
%
|
|
|
(2.5)
|
%
|
|
Shacks in the comparable base
|
|
|
|
44
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
Shack system-wide sales(1)
|
|
|
$
|
146,233
|
|
|
$
|
115,316
|
|
|
|
|
|
|
|
|
|
|
Average weekly sales
|
|
|
|
|
|
|
|
Domestic company-operated
|
|
|
$
|
81
|
|
|
$
|
86
|
|
|
|
|
|
|
|
|
|
|
Shack-level operating profit(2)
|
|
|
$
|
24,013
|
|
|
$
|
18,680
|
|
|
Shack-level operating profit margin(2)
|
|
|
|
25.0
|
%
|
|
|
25.2
|
%
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(2)
|
|
|
$
|
16,166
|
|
|
$
|
12,172
|
|
|
Adjusted EBITDA margin(2)
|
|
|
|
16.3
|
%
|
|
|
15.9
|
%
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
$
|
17,718
|
|
|
$
|
13,132
|
|
|
|
|
|
|
|
|
|
|
Shack counts (at end of period):
|
|
|
|
|
|
|
|
System-wide
|
|
|
|
168
|
|
|
|
127
|
|
|
|
Domestic company-operated
|
|
|
|
95
|
|
|
|
71
|
|
|
|
Domestic licensed
|
|
|
|
10
|
|
|
|
7
|
|
|
|
International licensed
|
|
|
|
63
|
|
|
|
49
|
|
|
________________
|
|
(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 and adjusted EBITDA to net income, 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 and adjusted pro forma earnings 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, the most directly
comparable GAAP financial measure, is set forth below.
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
|
|
March 28
|
|
March 29
|
|
(dollar amounts in thousands)
|
|
|
2018
|
|
2017
|
|
Operating income
|
|
|
$
|
6,514
|
|
|
$
|
5,628
|
|
|
Less:
|
|
|
|
|
|
|
|
Licensing revenue
|
|
|
3,027
|
|
|
2,594
|
|
|
Add:
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
11,809
|
|
|
8,470
|
|
|
|
Depreciation expense
|
|
|
6,498
|
|
|
4,748
|
|
|
|
Pre-opening costs
|
|
|
2,029
|
|
|
2,415
|
|
|
|
Loss on disposal of property and equipment
|
|
|
190
|
|
|
13
|
|
|
Shack-level operating profit
|
|
|
$
|
24,013
|
|
|
$
|
18,680
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
$
|
99,116
|
|
|
$
|
76,749
|
|
|
Less: licensing revenue
|
|
|
3,027
|
|
|
2,594
|
|
|
Shack sales
|
|
|
$
|
96,089
|
|
|
$
|
74,155
|
|
|
|
|
|
|
|
|
|
|
Shack-level operating profit margin
|
|
|
25.0
|
%
|
|
25.2
|
%
|
|
|
|
|
|
|
|
|
|
SHAKE SHACK INC.
NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
EBITDA and Adjusted EBITDA
EBITDA is defined as net income before interest expense (net of interest
income), income tax expense and depreciation and amortization expense.
Adjusted EBITDA is defined as EBITDA (as defined above) excluding
equity-based compensation expense, deferred rent expense, losses on the
disposal of property and equipment, 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, the most directly comparable GAAP measure, is set forth
below.
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
|
|
March 28
|
|
March 29
|
|
(in thousands)
|
|
|
2018
|
|
2017
|
|
Net income
|
|
|
$
|
4,979
|
|
|
$
|
3,862
|
|
|
Depreciation expense
|
|
|
6,498
|
|
|
4,748
|
|
|
Interest expense, net
|
|
|
558
|
|
|
283
|
|
|
Income tax expense
|
|
|
1,198
|
|
|
1,658
|
|
|
EBITDA
|
|
|
13,233
|
|
|
10,551
|
|
|
|
|
|
|
|
|
|
|
Equity-based compensation
|
|
|
1,437
|
|
|
1,249
|
|
|
Deferred rent
|
|
|
69
|
|
|
225
|
|
|
Loss on disposal of property and equipment
|
|
|
190
|
|
|
13
|
|
|
Executive transition costs(1)
|
|
|
—
|
|
|
134
|
|
|
Project Concrete(2)
|
|
|
239
|
|
|
—
|
|
|
Costs related to relocation of Home Office(3)
|
|
|
998
|
|
|
—
|
|
|
ADJUSTED EBITDA
|
|
|
$
|
16,166
|
|
|
$
|
12,172
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA margin
|
|
|
16.3
|
%
|
|
15.9
|
%
|
|
________________
|
|
(1)
|
|
Represents costs incurred in connection with the search for the
Company's chief financial officer, including fees paid to an
executive recruiting firm.
|
|
(2)
|
|
Represents consulting and advisory fees related to the
Company's operational and financial system upgrade initiative
called Project Concrete.
|
|
(3)
|
|
Costs incurred in connection with the Company's relocation to a
new Home Office, which is comprised of: (i) $326 of duplicative
non-cash deferred rent and (ii) $672 net loss on the sublease of
the Company's prior Home Office, including the write-off of
certain fixed assets.
|
SHAKE SHACK INC.
NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Adjusted Pro Forma Net Income and Adjusted Pro Forma Earnings Per
Fully Exchanged and Diluted Share
Adjusted pro forma net income represents net income 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 doesn't believe directly reflect its core operations and may not
be indicative of recurring business operations. Adjusted pro forma
earnings per fully exchanged and diluted share is calculated by dividing
adjusted pro forma net income 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 and adjusted pro forma earnings 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
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 and adjusted pro forma earnings 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 and adjusted pro forma
earnings per fully exchanged and diluted share should not be considered
alternatives to net income and earnings 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 attributable to Shake Shack
Inc. Adjusted pro forma net income and adjusted pro forma earnings per
fully exchanged and diluted share should be evaluated in conjunction
with GAAP financial results. A reconciliation of adjusted pro forma net
income to net income attributable to Shake Shack Inc., the most directly
comparable GAAP measure, and the computation of adjusted pro forma
earnings per fully exchanged and diluted share are set forth below.
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
|
|
March 28
|
|
March 29
|
|
(in thousands, except per share amounts)
|
|
|
2018
|
|
2017
|
|
Numerator:
|
|
|
|
|
|
|
|
Net income attributable to Shake Shack Inc.
|
|
|
$
|
3,508
|
|
|
$
|
2,267
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Reallocation of net income attributable to non-controlling interests
from the assumed exchange of LLC Interests(1)
|
|
|
1,471
|
|
|
1,595
|
|
|
|
|
Executive transition costs(2)
|
|
|
—
|
|
|
134
|
|
|
|
|
Project Concrete(3)
|
|
|
239
|
|
|
—
|
|
|
|
|
Costs related to relocation of Home Office(4)
|
|
|
998
|
|
|
—
|
|
|
|
|
Tax effect of change in tax basis related to the adoption of ASC 606
|
|
|
(311
|
)
|
|
—
|
|
|
|
|
Income tax expense(5)
|
|
|
(246
|
)
|
|
(321
|
)
|
|
|
Adjusted pro forma net income
|
|
|
$
|
5,659
|
|
|
$
|
3,675
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
Weighted-average shares of Class A common stock outstanding—diluted
|
|
|
27,822
|
|
|
25,955
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Assumed exchange of LLC Interests for shares of Class A common stock(1)
|
|
|
9,761
|
|
|
11,084
|
|
|
|
Adjusted pro forma fully exchanged weighted-average shares of Class
A common stock outstanding—diluted
|
|
|
37,583
|
|
|
37,039
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted pro forma earnings per fully exchanged share—diluted
|
|
|
$
|
0.15
|
|
|
$
|
0.10
|
|
|
________________
|
|
(1)
|
|
Assumes the exchange of all outstanding LLC Interests for
shares of Class A common stock, resulting in the elimination of
non-controlling interests and the recognition of net income
attributable to non-controlling interests.
|
|
(2)
|
|
Represents costs incurred in connection with the search for the
Company's chief financial officer, including fees paid to an
executive recruiting firm.
|
|
(3)
|
|
Represents consulting and advisory fees related to the
Company's operational and financial system upgrade initiative
called Project Concrete.
|
|
(4)
|
|
Costs incurred in connection with the Company's relocation to a
new Home Office, which consists of: (i) $326 of duplicative
non-cash deferred rent and (ii) $672 net loss on the sublease of
the Company's prior Home Office, including the write-off of
certain fixed assets.
|
|
(5)
|
|
Represents the tax effect of the aforementioned adjustments and
pro forma adjustments to reflect corporate income taxes at assumed
effective tax rates of 23.7% and 35.0% for the thirteen weeks
ended March 28, 2018 and March 29, 2017, respectively. Amounts
include provisions for U.S. federal and certain state and local
income taxes, assuming the highest statutory rates apportioned to
each applicable state and local jurisdiction.
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20180503006618/en/
Source: Shake Shack Inc.