Shake Shack Announces Third Quarter 2021 Financial Results

• Total Revenue grew 48.7% year-over-year to $193.9 million, and system-wide sales grew 53.1% to nearly $299 million.
• Third quarter Same-Shack Sales were up 24.8% versus 2020.
• Momentum versus 2019 continued into fiscal October with overall Same-Shack Sales down 1% and suburban Same-Shack Sales up 7%. All regions outside of NYC surpassed 2019 levels.
• Retained nearly 80% of digital sales in fiscal September from high in fiscal January 2021. Acquired 14% more first time purchasers through Company-owned digital channels versus the prior quarter.

Shake Shack Inc. (“Shake Shack” or the “Company”) (NYSE: SHAK) today reported its financial results for the third quarter ended September 29, 2021, a period that included 13 weeks.

Randy Garutti, Chief Executive Officer of Shake Shack, stated, “We are pleased with the positive sales performance seen during the third quarter. This quarter marks our highest revenue quarter ever, with total revenues of $193.9 million and system-wide sales of $298.6 million. We saw benefits to our urban Shacks as more of our guests returned to offices, events, commuting and tourism-based locations. Our suburban Shacks continue to recover and, on average, perform above 2019 levels. As of fiscal September, we had retained nearly 80% of our digital channel sales, compared to fiscal January 2021, even as in-Shack sales return. Sales strength aside, we are not immune to the margin pressures that are still being felt across our industry. Inflation in commodity prices and investments across team members are pressuring our margins. We remain committed to investing in our team members to ensure we are retaining and developing the best talent in our industry, and these pressures are likely to persist for the foreseeable future. Our team is working harder than ever to take care of each other, bring hospitality to our neighborhoods, transform our Shack formats, invest in critical digital infrastructure, and uplift everyone in the Shack community along the way."

Financial Highlights for the Third Quarter of 2021:

• Total revenue in the third quarter of 2021 increased 48.7% to $193.9 million versus the same period last year.
• Shack sales in the third quarter of 2021 increased 48.1% to $187.0 million versus the same period last year.
• Same-Shack sales⁽¹⁾ improved to up 24.8% in the third quarter of 2021 versus the same period last year.
• Licensed revenue in the third quarter of 2021 increased 68.3% to $6.9 million versus the same period last year.
• Shack system-wide sales in the third quarter of 2021 increased 53.1% to $298.6 million versus the same period last year.
• Operating loss in the third quarter of 2021 was $2.6 million compared to an Operating loss of $6.8 million in the same period last year.
• Shack-level operating profit⁽²⁾ increased 58.6% in the third quarter of 2021 versus the same period last year, to $29.6 million, or 15.8% of Shack sales.
• Net loss was $2.4 million and adjusted EBITDA⁽²⁾ was $15.8 million in the third quarter of 2021, compared to a Net loss of $6.1 million and adjusted EBITDA of $8.2 million in the same period last year.
• Net loss attributable to Shake Shack Inc. was $2.2 million and adjusted pro forma net loss⁽²⁾ was $2.0 million, or a loss of $0.05 per fully exchanged and diluted share in the third quarter of 2021, compared to Net loss attributable to Shake Shack Inc. of $5.6 million and adjusted pro forma net loss of $4.4 million, or a loss of $0.11 per fully exchanged and diluted share, in the same period last year.
• Net system-wide Shack openings, comprised of five net domestic Company-operated Shacks and six net licensed Shacks.
• Cash and cash equivalents and marketable securities on hand was $401.5 million as of September 29, 2021.

Third Quarter 2021 Review

Total revenue, which includes Shack sales and Licensing revenue, increased 48.7% versus the third quarter of 2020, to $193.9 million in the third quarter of 2021. Shack sales for the third quarter of 2021 were $187.0 million compared to $126.3 million in the third quarter of 2020, reflecting an increase of $60.7 million, or 48.1%, due in part to the opening of 30 net new domestic Company-operated Shacks between September 23, 2020 and September 29, 2021, as well as continued sales recovery across Shack markets.

Same-Shack Sales grew 24.8% year-over-year in the third quarter of 2021, compared to up 52.7% in the second quarter of 2021. This year-over-year growth in the third quarter was driven by a strong recovery across traffic, offset slightly by mix as we saw more of our guests return to in-Shack dining. We also saw improvement in our comparisons to 2019, improving from down 12.4% in the second quarter to down 7.3% in the third quarter. Throughout the third quarter we continued to see a steady recovery across our urban markets, likely led by the return to offices and increased travel. Markets such as New York City, Los Angeles, Chicago and Boston were the main drivers behind our urban growth. We also saw sequential improvement across our suburban Shacks, which span a variety of formats, with Same-Shack sales across this base exiting the quarter up 2% in fiscal September versus 2019. Suburban sales grew in the quarter despite being impacted by inclement weather and COVID related closures.

Average weekly sales were $72,000 in the third quarter of 2021, exceeding our historical seasonal expectations by coming in flat quarter-over-quarter. The third quarter also grew when compared to the first quarter of 2021, which saw average weekly sales of $64,000.

During the third quarter of 2021, total digital sales, including orders placed on the Shake Shack app, website and third-party delivery platforms, represented approximately 42% of Shack sales. Our retention of digital sales continues to hold steady at nearly 80% in fiscal September compared to fiscal January when digital sales peaked. The third quarter also saw the launch of our redesigned website, which is another key component of our omnichannel digital ecosystem. Not only does this redesign better showcase the Shake Shack brand and direct users to our Shake Shack app, it also improves the ease of ordering for our guests, especially on mobile web use cases. We are already beginning to see more web users download the Shake Shack app, an encouraging sign for the future of our digital business.

Licensing revenue for the third quarter of 2021 was $6.9 million, reflecting an increase of 68.3% versus the same period last year. Our domestic Shacks benefited from more air travel and lesser restrictions on capacity at major US sports venues while our international Shacks benefited from the relaxation of COVID restrictions in select markets. While we continue to benefit from the overall global recovery, conditions still remain volatile and ever-changing. As a reminder, as of fiscal October end, 6 of our airport locations around the world were still temporarily closed.

Operating loss for the third quarter of 2021 was $2.6 million, or a negative operating margin of 1.4%, compared to Operating loss of $6.8 million, or a negative operating margin of 5.2% for the third quarter of 2020. For the third quarter of 2021, Shack-level operating profit, a non-GAAP measure, was $29.6 million, or 15.8% of Shack sales, compared to Shack-level operating profit of $34.8 million, or 19.2% of Shack sales in the second quarter of 2021. This decrease versus the second quarter of 2021 was primarily the result of team member investments and chicken and beef inflation during the third quarter of 2021. A reconciliation of Shack-level operating profit to Loss from Operations, 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 $20.5 million in the third quarter of 2021 from $15.0 million in the third quarter of 2020. The third quarter of 2021 includes $2.3 million of equity-based compensation and other non-cash items. This increase was primarily due to the integral investments we are making across the business to support our people, as well as marketing and technology initiatives. We remain committed to leveraging our strong balance sheet to support these long term strategic plans as we move into 2022 and beyond. As a percentage of Total revenue, General and administrative expenses decreased to 10.6% for the third quarter of 2021 from 11.5% in the third quarter of 2020.

Development Highlights

During the third quarter of 2021, the Company opened five new domestic Company-operated Shacks and eight new licensed Shacks. These openings were partially offset by the closure of two international licensed Shacks in the third quarter of 2021.

In fiscal October 2021, the Company opened two additional domestic Company-operated Shacks and one additional international licensed Shack.

Fiscal 2021 Outlook⁽¹⁾

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

Fiscal fourth quarter and fiscal year 2021 guidance is derived from recent trends and does not assume material changes to the current operating environment, inclusive of any potential further COVID impacts. The Company is reaffirming the full year Shack openings and expense guidance provided earlier this year.

Earnings Conference Call

As previously announced, the Company will host a conference call to discuss its third 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 November 11, 2021 by dialing (844) 512-2921 or for international callers by dialing (412) 317-6671; the passcode is 13723016.

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 fourth 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, increased costs or shortages or interruptions in the supply and delivery of our products, increased labor costs or shortages, the Company's management of its digital capabilities and expansion into delivery, our ability to maintain and grow sales at our existing Shacks, 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.

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 Loss from Operations, the most directly comparable GAAP financial measure, is set forth below.

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.

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211104006233/en/