– Average Weekly Sales and Same-Shack Sales
Show Significant Sequential Improvement in both Urban and Suburban
Shacks
– Sales in Company-Owned Digital Channels
Tripled Compared to Prior Year
– Shack-level Operating Profit Improves to
14.8% Compared to 2.2% in Second Quarter 2020
Shake Shack Inc. (“Shake Shack” or the “Company”) (NYSE:
SHAK) today reported its financial results for the third quarter
ended September 23, 2020, a period that included 13 weeks.
Randy Garutti, Chief Executive Officer of Shake Shack, stated,
“Our business during this most recent quarter showed steady
recovery, thanks to the hard work and dedication of our team, their
agility in adapting new Shack protocols and models and an
increasingly strong suite of digital capabilities. As a result,
guests have been able to enjoy their Shack the way they want it,
with a choice of convenient and safe ordering and pick-up options,
as we continue to expand and elevate the Shake Shack
experience."
Garutti concluded, “Since our last update at the end of July,
forward momentum has continued and we're encouraged to see
significant improvement in both sales and profitability, with many
Shacks returning to or exceeding last year's results. Total
year-over-year company-operated Shack sales declined 17% in the
third quarter, compared to a decline of 39% during the second
quarter, and further improved to a decline of just 5% in fiscal
October. Same-Shack sales have also improved sequentially in every
single one of the last six months, with the third quarter down
31.7% compared to the same period last year, versus down 49.0% in
the second quarter, and improving to down 21% in fiscal October.
Importantly, our improving top line performance, the normalization
of beef costs, and disciplined expense management led to a
significant recovery in Shack-level profitability with third
quarter Shack-level operating profit margin improving to 14.8%,
compared to 2.2% in the second quarter. We believe we are uniquely
positioned to exit this challenging period stronger, and with
greater opportunity than when we entered, as we double down on
multi-format expansion and accelerate our strategic digital
investments. As of the end of fiscal October, we are back to a full
development schedule, having opened 33 Shacks so far in this
challenging year, including 15 domestic company-operated Shacks,
and expect to complete the year with 18 to 20 total new
company-operated Shacks. Our pipeline for 2021 is strong, and we
expect to open between 35 and 40 new company-operated Shacks, many
of which will incorporate our new Shack Track and Drive Thru
designs centered on the hospitality and experience Shake Shack has
been known for, with an added focus on speed, convenience and the
integration of our pre-ordering digital capabilities.”
Financial Highlights for the Third Quarter 2020:
- Total revenue in the third quarter 2020 decreased 17.3%
to $130.4 million versus the same period last year, showing
sequential improvement when compared to a decline of 39.9% in the
prior quarter. Further improvement carried through October 21
("fiscal October"), with a decline of 5.7% versus the same period
last year.
- Shack sales in the third quarter 2020 decreased 17.1% to
$126.3 million versus the same period last year, showing sequential
improvement when compared to a decline of 39.5% in the prior
quarter. Total Shack sales improved further in fiscal October with
a decline of 5.3% versus the same period last year.
- Same-Shack sales sequentially improved every fiscal
month since fiscal April, down 31.7% in the third quarter 2020
versus the same period last year, compared to down 49.0% in the
prior quarter. In fiscal October, Same-Shack sales continued to
recover, with a decline of 21% versus the same period last year.
Within same-Shack sales:
- Suburban same-Shack sales were down 16% during the third
quarter 2020 versus the same period last year, compared to down 38%
in the prior quarter, and improving to down 4% in fiscal
October.
- Urban same-Shack sales were down 43% during the third quarter
2020 versus the same period last year, compared to down 57% in the
prior quarter, and improving to down 33% in fiscal October.
- Licensed revenue in the third quarter decreased 23.8% to
$4.1 million versus the same period last year, showing sequential
improvement when compared to a decline of 53.1% in the prior
quarter.
- Shack system-wide sales in the third quarter decreased
18.4% to $195.1 million, versus the same period last year, showing
sequential improvement when compared to down 45.2% in the prior
quarter, and improving to down 7.1% in fiscal October.
- Operating loss in the third quarter was $6.8 million,
compared to operating income of $8.2 million versus the same period
last year, showing improvement when compared to an operating loss
of $24.1 million in the prior quarter.
- Shack-level operating profit*, a non-GAAP measure,
decreased 46.9% to $18.7 million, or 14.8% of Shack sales in the
third quarter 2020, versus a Shack-level operating profit of $1.9
million, or 2.2% of Shack sales in the prior quarter.
- Net loss was $6.1 million and adjusted EBITDA*, a
non-GAAP measure, was $8.2 million in the third quarter 2020,
compared to net income of $11.4 million and adjusted EBITDA of
$23.3 million in the same period last year.
- Net loss attributable to Shake Shack Inc. was $5.6
million and adjusted pro forma net loss*, a non-GAAP measure, was
$4.4 million, or a loss of $0.11 per fully exchanged and diluted
share in the third quarter 2020, compared to net income
attributable to Shake Shack Inc. of $10.3 million, adjusted pro
forma net income of $10.0 million, or $0.26 per fully exchanged and
diluted share, in the same period last year.
- Six system-wide Shack openings, comprised of four
domestic Company-operated Shacks and two net licensed Shacks.
- Cash and marketable securities on hand was $191.8
million as of September 23, 2020.
* 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), 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.”
Third Quarter 2020 Review
Total revenue, which includes Shack sales and licensing
revenue, decreased 17.3% versus the third quarter 2019, to $130.4
million in the third quarter of 2020, due to lost sales related to
the impact from the COVID-19 pandemic. Total revenue has, however,
shown steady and significant improvement when compared to a decline
of 39.9% during the second quarter. Further improvement carried
through fiscal October, with a year-over-year decline of 5.7%.
Shack sales for the third quarter of 2020 were $126.3 million
compared to $152.4 million in the third quarter 2019, a decrease of
$26.1 million, or 17.1%, primarily due to a decline in same-Shack
sales, partially offset by the opening of 24 new domestic
company-operated Shacks between September 25, 2019 and September
23, 2020. Shack sales have also, notably improved from a decline of
39.5% during the second quarter, and also subsequent to the third
quarter with fiscal October declining just 5.3% year-over-year.
Same-Shack sales improved across all regions on a sequential
basis, with performance driven by increases in in-Shack dining in
both urban and suburban Shacks, combined with high levels of
retention of digital sales since fiscal May. Most notably,
same-Shack sales have improved sequentially over each of the last
six months. During the third quarter of 2020, same-Shack sales were
down 31.7% compared to the same period last year, with the
Company's urban Shacks down 43% and suburban Shacks down 16%
compared to the same period last year. The decrease in same-Shack
sales for the quarter was driven by a 42.0% decrease in traffic
partially offset by an increase in price mix of 10.3%. This
increase in price mix was driven by a significant increase in
average check, primarily from a higher digital sales mix combined
with an overall increase in check, due to higher items per order
since the start of the pandemic. The Company's third quarter 2020
same-Shack sales reflect sequential improvement from the prior
quarter, in which same-Shack sales were down 49.0%, with urban
Shacks down 57% and suburban Shacks down 38%. Subsequent to the
third quarter of 2020, in fiscal October 2020, same-Shack sales
were down 21%, with the Company's urban Shacks down 33% and
suburban Shacks down 4% compared to the same period last year.
Urban Shacks represent approximately half the Shacks in the
comparable base, yet accounted for approximately 60% of its
same-Shack sales prior to the COVID-19 outbreak. As expected, urban
locations are still acutely impacted by the pandemic and suburban
locations continue to recover at a faster pace. New York City,
particularly Manhattan, continues to lag other regions and the
Company expects this to be an ongoing trend until the city fully
recovers. New York City same-Shack sales have however, shown
continued sequential improvement, being down 49% in the third
quarter 2020 compared to down 64% in the second quarter, and now
down 40% in fiscal October, versus the same periods last year.
Manhattan will continue to have a material and outweighed impact on
New York City’s results and those of the Company overall, with
Manhattan still down 60% in same-Shack sales during the third
quarter 2020, versus down 69% in the second quarter, and now down
51% in fiscal October.
Nearly all domestic company-operated Shacks were open as of the
end of the third quarter 2020 and through fiscal October. As of the
end of fiscal October, approximately 80% of the Company's domestic
company-operated Shacks had open dining rooms with varying capacity
restrictions, with the majority of Shacks also utilizing outdoor
patio space, whenever possible.
During the third quarter of 2020, total digital sales, including
orders placed on the Shake Shack app, website and third party
delivery platforms, represented 60% of total Shack sales. As
in-Shack sales improved throughout the period, the Company also
maintained a high level of digital retention, with more than 90% of
digital sales retained in fiscal October compared to the high point
in fiscal May. During the third quarter and similar to second
quarter trends, Shake Shack's native web and app channels, when
combined, continued to be the fastest growing channel on a
year-on-year basis, with sales more than three times the prior year
levels. In the second quarter 2020, the Company added over 800,000
first-time purchasers to the app and web channels between early
March and the end of July. This trend has continued through fiscal
October, increasing to over 1.4 million first-time purchasers on
those channels since early March.
The following table presents fiscal monthly information about
the Company's current trends in Shack sales.
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
(dollar amounts in thousands)
March 25
April 22
May 20
June 24
July 22
August 19
September 23
October 21
Average weekly sales
$
56
$
32
$
50
$
52
$
56
$
59
$
61
$
62
Total year-over-year sales growth
(decline)
(11
)
%
(56
)
%
(32
)
%
(32
)
%
(23
)
%
(20
)
%
(10
)
%
(5
)
%
Same-Shack sales %
(29
)
%
(64
)
%
(42
)
%
(42
)
%
(39
)
%
(34
)
%
(23
)
%
(21
)
%
Licensing revenue for the third quarter of 2020 was $4.1
million, a decrease of 23.8% from $5.4 million in the third quarter
2019, due to reduced sales related to the COVID-19 pandemic,
partially offset by a net increase of 20 Shacks opening between
September 25, 2019 and September 23, 2020. The Company's licensed
business has shown gradual improvement, as noted in the table
below. The Company's licensed airport and stadium business,
however, continues to be deeply impacted, with only nine of the 22
domestic licensed Shacks open as of the end of fiscal October. The
following table presents fiscal monthly information about the
Company's licensed sales trends.
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
(dollar amounts in millions)
March 25
April 22
May 20
June 24
July 22
August 19
September 23
October 21
Weekly licensed sales(1)
$
4.6
$
2.0
$
2.4
$
3.5
$
4.6
$
5.4
$
5.7
$
5.9
Total year-over-year licensed sales growth
(decline)
13
%
(65
)
%
(58
)
%
(47
)
%
(32
)
%
(23
)
%
(9
)
%
(10
)
%
Number of open licensed Shacks
96
56
59
91
98
104
105
107
_____________________
(1)
Weekly licensed sales is an operating
measure and consists of sales from 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 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.
During the third quarter of 2020, the Company opened four new
domestic company-operated Shacks, five new international licensed
Shacks, and one domestic licensed Shack. These openings were
partially offset by the COVID-related closure of three
international licensed Shacks and one domestic licensed Shack,
including the Shack located in Terminal 3 of the LAX airport.
Location
Type
Opening Date
Shanghai, China — Grand Gateway
International Licensed
6/28/2020
Palm Beach Gardens, FL — Gardens Mall
Domestic Company-Operated
7/7/2020
Dubai, United Arab Emirates — Deira City
Centre
International Licensed
7/8/2020
Daegu, South Korea — Daegu Dongseongro
International Licensed
7/10/2020
Singapore — Orchard Road
International Licensed
8/5/2020
Beijing, China — Taikoo Li Sanlitum
International Licensed
8/12/2020
Salt Lake City, UT — Salt Lake City
International Airport
Domestic Licensed
9/15/2020
Seattle, WA — University Village
Domestic Company-Operated
9/17/2020
Roseville, CA — Galleria at Roseville
Domestic Company-Operated
9/21/2020
Santa Clara, CA — Valley Fair
Domestic Company-Operated
9/22/2020
Operating loss for the third quarter of 2020 was $6.8
million, a negative operating margin of 5.2%, compared to operating
income of $8.2 million, or an operating margin of 5.2% for the
third quarter 2019. For the third quarter of 2020, Shack-level
operating profit, a non-GAAP measure, was $18.7 million, or 14.8%
as a percentage of Shack sales, compared to Shack-level operating
profit of $1.9 million, or 2.2% of Shack sales in the second
quarter 2020. Shack-level operating profit performance improved
sequentially throughout the third quarter, with fiscal July margin
of 12%, fiscal August margin of 14% and the five-week fiscal
September margin of 17%. The year-over-year decrease in Shack-level
operating profit was primarily due to sales deleverage resulting
from the impact of COVID-19. In addition this decrease was also
driven by increased paper and packaging costs as a result of
packaging all orders as 'to go' orders, a number of incremental
payroll costs to support Shack employees and higher delivery
commissions as a result of digital growth. 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 decreased to $15.0
million for the third quarter of 2020 from $17.1 million in the
third quarter 2019. This was primarily due to disciplined cost
reduction across the majority of discretionary spend categories and
reduced home office compensation expense, partially offset by
increased expenses across marketing and technology to support
digital initiatives. As a percentage of total revenue, general and
administrative expenses increased to 11.5% for the third quarter of
2020 from 10.8% in the third quarter 2019, primarily due to sales
deleverage associated with the impact of COVID-19.
Net loss for the third quarter of 2020 was $6.1 million,
or 4.7% of total revenue, compared to net income of $11.4 million,
or 7.2% of total revenue, for the third quarter 2019. Net loss
attributable to Shake Shack Inc. for the third quarter of 2020 was
$5.6 million, or 4.3% of total revenue, compared to net income
attributable to Shake Shack Inc. of $10.3 million, or 6.6% of total
revenue, for the third quarter 2019. Loss per diluted share for the
third quarter of 2020 was $0.15 compared to earnings per diluted
share of $0.31 for the third quarter 2019.
Updated 2020 Outlook
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 30,
2020. While the Company is confident in a full, long term recovery,
the timing of that return to pre-COVID levels is highly dependent
upon the return of the high traffic areas that contributed to many
of the strongest Shack sales, including those most reliant on
travel, schools, offices and major gatherings, as well as
ultimately, fully open dining rooms. The timing of that recovery
remains unknown today. With the colder weather and the increasing
number of reported COVID cases, it is expected that sales over the
coming months will be pressured. The Company has the benefit of a
53rd week in this fiscal year which will be accretive on an
absolute dollar basis, but the underlying business continues to
face a very challenging and volatile operating environment
certainly through the end of this year.
The Company expects to reach a total of 18 to 20 new
company-operated Shacks by the end of fiscal 2020. Furthermore, the
Company expects to open five to six new licensed Shacks in the
fourth quarter 2020, ending the year with 12 to 14, net licensed
Shacks in total for fiscal 2020. Looking to the next fiscal year,
the Company expects to open between 35 and 40 new company-operated
Shacks in fiscal 2021, a number of which should open in the first
half of fiscal 2021. Additionally, the Company expects to open 15
to 20 new licensed Shacks in fiscal 2021.
With the continued recovery of Shack-level operating profit
highly correlated to sales performance in terms of leverage on
fixed costs, combined with the continuation of certain elevated
costs specific to the pandemic, the Company expects any ongoing
improvement in Shack-level operating margin in the fourth quarter
to face pressure.
The Company expects fourth quarter 2020 general and
administrative expenses to approach the same level of spend as the
fourth quarter 2019.
Pre-opening expense for the third quarter 2020 was $1.8 million,
however, now that development is back to a full opening schedule,
this spend will increase meaningfully, and is expected to more than
double sequentially through the fourth quarter 2020 as the Company
completes this year's opening schedule.
Excluding the tax impact of stock based compensation, the
adjusted pro forma tax rate in the third quarter 2020 was 29.3%,
slightly higher than guidance given earlier in the year. The
year-to-date adjusted pro forma tax rate was 28.1%, and is in line
with full fiscal year expectations at this time. A reconciliation
of the Company's tax rates is included in the appendix of our
supplemental materials.
Earnings Conference Call
As previously announced, the Company will host a conference call
to discuss its third quarter 2020 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
November 5, 2020 by dialing (844) 512-2921 or for international
callers by dialing (412) 317-6671; the passcode is 13710062.
The live audio webcast of the conference call will be accessible
in the Events & Presentations section of 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 2019
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.
"Weekly licensed sales” is calculated by dividing the total
sales for the period for all licensed Shacks by the number of weeks
in the period.
"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 net
income (loss) before net interest, taxes, depreciation and
amortization, which also excludes 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 and other items that the Company
does not believe directly reflect its core operations, as a
percentage of revenue.
"Adjusted pro forma net income (loss)," 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 known for
its 100% all-natural Angus beef burgers, chicken sandwiches and
flat-top Vienna beef dogs (no hormones or antibiotics - ever),
spun-fresh frozen custard, crinkle cut fries, craft beer and wine
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. 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 300 locations in 30
U.S. States and the District of Columbia, including more than 100
international locations including London, Hong Kong, Shanghai,
Singapore, Philippines, Mexico, 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 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 for fiscal 2020,
expected operating performance for fiscal 2020, expected Shack
construction and openings, expected same-Shack sales growth and
trends in the Company’s operations, including statements relating
to the effects of COVID-19 and the Company’s mitigation efforts.
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. 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 25,
2019 and Quarterly Report on Form 10-Q for the quarterly period
ended June 24, 2020 as filed with the Securities and Exchange
Commission ("SEC"). All of the Company's SEC filings are available
online at www.sec.gov, www.shakeshack.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
Thirty-Nine Weeks
Ended
September 23
2020
September 25
2019
September 23
2020
September 25
2019
Shack sales
$
126,288
96.8
%
$
152,366
96.6
%
$
353,855
96.9
%
$
428,811
96.8
%
Licensing revenue
4,113
3.2
%
5,396
3.4
%
11,502
3.1
%
14,273
3.2
%
TOTAL REVENUE
130,401
100.0
%
157,762
100.0
%
365,357
100.0
%
443,084
100.0
%
Shack-level operating expenses(1):
Food and paper costs
37,903
30.0
%
44,159
29.0
%
107,494
30.4
%
125,049
29.2
%
Labor and related expenses
37,898
30.0
%
41,601
27.3
%
110,597
31.3
%
118,891
27.7
%
Other operating expenses
18,743
14.8
%
18,947
12.4
%
50,826
14.4
%
51,270
12.0
%
Occupancy and related expenses
13,093
10.4
%
12,537
8.2
%
37,974
10.7
%
35,309
8.2
%
General and administrative expenses
14,962
11.5
%
17,090
10.8
%
45,170
12.4
%
46,420
10.5
%
Depreciation expense
12,376
9.5
%
10,474
6.6
%
36,233
9.9
%
29,239
6.6
%
Pre-opening costs
1,822
1.4
%
4,487
2.8
%
5,799
1.6
%
10,678
2.4
%
Impairment and loss on disposal of
assets
402
0.3
%
303
0.2
%
2,924
0.8
%
1,031
0.2
%
TOTAL EXPENSES
137,199
105.2
%
149,598
94.8
%
397,017
108.7
%
417,887
94.3
%
OPERATING INCOME (LOSS)
(6,798
)
(5.2
)
%
8,164
5.2
%
(31,660
)
(8.7
)
%
25,197
5.7
%
Other income, net
34
—
%
248
0.2
%
335
0.1
%
1,259
0.3
%
Interest expense
(143
)
(0.1
)
%
(133
)
(0.1
)
%
(697
)
(0.2
)
%
(302
)
(0.1
)
%
INCOME (LOSS) BEFORE INCOME
TAXES
(6,907
)
(5.3
)
%
8,279
5.2
%
(32,022
)
(8.8
)
%
26,154
5.9
%
Benefit from income taxes
(797
)
(0.6
)
%
(3,144
)
(2.0
)
%
(6,802
)
(1.9
)
%
(47
)
—
%
NET INCOME (LOSS)
(6,110
)
(4.7
)
%
11,423
7.2
%
(25,220
)
(6.9
)
%
26,201
5.9
%
Less: net income (loss) attributable to
non-controlling interests
(551
)
(0.4
)
%
1,079
0.7
%
(2,490
)
(0.7
)
%
4,281
1.0
%
NET INCOME (LOSS) ATTRIBUTABLE TO SHAKE
SHACK INC.
$
(5,559
)
(4.3
)
%
$
10,344
6.6
%
$
(22,730
)
(6.2
)
%
$
21,920
4.9
%
Earnings (loss) per share of Class A
common stock:
Basic
$
(0.15
)
$
0.32
$
(0.62
)
$
0.72
Diluted
$
(0.15
)
$
0.31
$
(0.62
)
$
0.70
Weighted-average shares of Class A common
stock outstanding:
Basic
38,251
31,961
36,668
30,549
Diluted
38,251
32,916
36,668
31,441
_____________
(1)
As a percentage of Shack sales.
SHAKE SHACK INC.
SELECTED BALANCE SHEET DATA
AND OPERATING DATA
(UNAUDITED)
(in thousands)
September 23
2020
December 25
2019
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents
$
174,883
$
37,099
Marketable securities
$
16,879
$
36,508
Total assets
$
1,137,202
$
968,268
Total liabilities
$
690,440
$
646,283
Total equity
$
446,762
$
321,985
Thirteen Weeks Ended
Thirty-Nine Weeks
Ended
(dollar amounts in thousands)
September 23
2020
September 25
2019
September 23
2020
September 25
2019
SELECTED OPERATING DATA:
Same-Shack sales growth (decline)
(31.7
)
%
2.0
%
(31.5
)
%
3.0
%
Shacks in the comparable base
102
79
102
79
Shack system-wide sales(1)
$
195,075
$
239,069
$
540,445
$
660,199
Average weekly sales
Domestic company-operated
$
58
$
80
$
56
$
81
Shack-level operating profit(2)
$
18,651
$
35,122
$
46,964
$
98,292
Shack-level operating profit margin(2)
14.8
%
23.1
%
13.3
%
22.9
%
Adjusted EBITDA(2)
$
8,159
$
23,282
$
13,589
$
67,042
Adjusted EBITDA margin(2)
6.3
%
14.8
%
3.7
%
15.1
%
Capital expenditures
$
9,365
$
24,906
$
47,002
$
80,904
Shack counts (at end of period):
System-wide
298
254
298
254
Domestic company-operated
175
151
175
151
Domestic licensed
22
17
22
17
International licensed
101
86
101
86
_____________________
(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
Thirty-Nine Weeks
Ended
(dollar amounts in thousands)
September 23
2020
September 25
2019
September 23
2020
September 25
2019
Operating income (loss)
$
(6,798
)
$
8,164
$
(31,660
)
$
25,197
Less:
Licensing revenue
4,113
5,396
11,502
14,273
Add:
General and administrative expenses
14,962
17,090
45,170
46,420
Depreciation expense
12,376
10,474
36,233
29,239
Pre-opening costs
1,822
4,487
5,799
10,678
Impairment and loss on disposal of
assets
402
303
2,924
1,031
Shack-level operating profit
$
18,651
$
35,122
$
46,964
$
98,292
Total revenue
$
130,401
$
157,762
$
365,357
$
443,084
Less: licensing revenue
4,113
5,396
11,502
14,273
Shack sales
$
126,288
$
152,366
$
353,855
$
428,811
Shack-level operating profit margin
14.8
%
23.1
%
13.3
%
22.9
%
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 set forth
below.
Thirteen Weeks Ended
Thirty-Nine Weeks
Ended
(in thousands)
September 23
2020
September 25
2019
September 23
2020
September 25
2019
Net income (loss)
$
(6,110
)
$
11,423
$
(25,220
)
$
26,201
Depreciation expense
12,376
10,474
36,233
29,239
Interest expense, net
143
133
697
302
Income tax benefit
(797
)
(3,144
)
(6,802
)
(47
)
EBITDA
5,612
18,886
4,908
55,695
Equity-based compensation
1,339
1,884
4,058
5,839
Amortization of cloud-based software
implementation costs(1)
458
107
1,086
107
Deferred lease costs(2)
258
743
407
2,043
Impairment and loss on disposal of
assets(3)
402
303
2,924
1,031
Other income related to adjustment of
liabilities under tax receivable agreement
—
—
—
(14
)
Executive transition costs(4)
82
—
150
126
Project Concrete(5)
8
1,346
(229
)
2,031
Hong Kong office(6)
—
13
—
184
Other(7)
—
—
285
—
ADJUSTED EBITDA
$
8,159
$
23,282
$
13,589
$
67,042
Adjusted EBITDA margin(8)
6.3
%
14.8
%
3.7
%
15.1
%
_____________________
(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)
For the thirty-nine weeks ended September
23, 2020, this amount includes a non-cash impairment charge of $1.1
million related to one Shack.
(4)
Represents fees paid in connection with
the search and hiring of certain executive and key management
positions.
(5)
Represents consulting and advisory fees
related to the Company's enterprise-wide system upgrade initiative
called Project Concrete.
(6)
Represents costs associated with
establishing the Company's first international office in Hong
Kong.
(7)
Represents incremental expenses incurred
related to an inventory adjustment and certain employee-related
expenses.
(8)
Calculated as a percentage of total
revenue, which was $130,401 and $365,357 for the thirteen and
thirty-nine weeks ended September 23, 2020, respectively, and
$157,762 and $443,084 for the thirteen and thirty-nine weeks ended
September 25, 2019, 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
Thirty-Nine Weeks
Ended
(in thousands,
except per share amounts)
September 23
2020
September 25
2019
September 23
2020
September 25
2019
Numerator:
Net income (loss) attributable to Shake
Shack Inc.
$
(5,559
)
$
10,344
$
(22,730
)
$
21,920
Adjustments:
Reallocation of net income (loss)
attributable to non-controlling interests from the assumed exchange
of LLC Interests(1)
(551
)
1,079
(2,490
)
4,281
Executive transition costs(2)
82
—
150
126
Project Concrete(3)
8
1,346
(229
)
2,031
Hong Kong office(4)
—
13
—
184
Other(5)
—
—
285
—
Other income related to adjustment of
liabilities under tax receivable agreement
—
—
—
(14
)
Tax effect of change in tax basis related
to the adoption of new accounting standards(6)
—
—
—
1,161
Income tax (expense) benefit (7)
1,608
(2,765
)
3,141
(4,478
)
Adjusted pro forma net income (loss)
$
(4,412
)
$
10,017
$
(21,873
)
$
25,211
Denominator:
Weighted-average shares of Class A common
stock outstanding—diluted
38,251
32,916
36,668
31,441
Adjustments:
Assumed exchange of LLC Interests for
shares of Class A common stock(1)
3,114
5,393
3,125
6,674
Adjusted pro forma fully exchanged
weighted-average shares of Class A common stock
outstanding—diluted
41,365
38,309
39,793
38,115
Adjusted pro forma earnings (loss) per
fully exchanged share—diluted
$
(0.11
)
$
0.26
$
(0.55
)
$
0.66
Thirteen Weeks Ended
Thirty-Nine Weeks
Ended
September 23
2020
September 25
2019
September 23
2020
September 25
2019
Earnings (loss) per share of Class A
common stock - diluted
$
(0.15
)
$
0.31
$
(0.62
)
$
0.70
Assumed exchange of LLC Interests for
shares of Class A common stock(1)
—
(0.02
)
(0.01
)
(0.01
)
Non-GAAP adjustments(8)
0.04
(0.03
)
0.08
(0.03
)
Adjusted pro forma earnings (loss) per
fully exchanged share—diluted
$
(0.11
)
$
0.26
$
(0.55
)
$
0.66
____________________
(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 the Company's executive search, including fees paid to an
executive recruiting firm.
(3)
Represents consulting and advisory fees
related to the Company's enterprise-wide system upgrade initiative
called Project Concrete.
(4)
Represents costs associated with
establishing the Company's first international office in Hong
Kong.
(5)
Represents incremental expenses incurred
related to an inventory adjustment and certain employee-related
expenses.
(6)
Represents tax effect of change in tax
basis related to the adoption of the new lease accounting standard
for the thirteen and thirty-nine weeks ended September 25,
2019.
(7)
Represents the tax effect of the
aforementioned adjustments and pro forma adjustments to reflect
corporate income taxes at assumed effective tax rates of 35.3% and
31.3% for the thirteen and thirty-nine weeks ended September 23,
2020, respectively, and (3.9)% and 11.5% for the thirteen and
thirty-nine weeks ended September 25, 2019, respectively.
(8)
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 further
details.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201029006256/en/
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
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