Shake Shack (SHAK) Q4 2015 earnings summary

Executive summary

• FY15 revenue rose 60.8% to $190.6M; 21 system-wide openings lifted the Shack count to 84, while same-Shack sales grew 13.3%.

• Adjusted EBITDA increased 117.7% to $41.1M; net loss attributable to Shake Shack Inc. was $8.8M, largely reflecting IPO-related items and non-controlling interests.

Financial highlights

• Shack sales rose 63.5% to $183.2M; licensing revenue increased 13.6% to $7.4M.

• GAAP net income was $3.1M, but net loss attributable to Shake Shack Inc. was $8.8M after $11.9M attributable to non-controlling interests.

• Adjusted pro forma net income rose 154.9% to $12.0M, or $0.32 per fully exchanged diluted share, vs. $4.7M and $0.13 in FY14.

• Q4 revenue was $51.1M; operating income $3.7M, net income $3.0M and net income attributable to Shake Shack Inc. $1.2M.

• Operating cash flow increased to $41.3M from $13.6M; capital expenditures and marketable-security purchases drove $34.5M of investing cash outflow.

Outlook and guidance

• FY16 revenue expected at $237–242M; same-Shack sales growth guidance is 2.5–3.0%, with higher growth expected in H1 due to FY15 H2 strength.

• Plan calls for at least 13 new domestic company-operated Shacks, with new units expected to average at least $3.3M in annual sales and 22% Shack-level operating margins.

• Seven licensed openings planned across the U.K., Middle East and Japan, plus one domestic licensed Shack at Las Vegas’ T-Mobile Arena.

• Labor and related expenses expected to deleverage 100–150 bps of Shack sales YoY; adjusted pro forma effective tax rate expected at 43–44%.

• Long-term target-volume Shacks expected to generate $2.8–3.2M annual sales and 18–22% Shack-level operating margins.