Shake Shack (SHAK) Q4 2017 earnings summary

Executive summary

• FY17 revenue rose 33.6% to $358.8M as 45 net system-wide Shack openings lifted the total to 159; same-Shack sales fell 1.2%.

• GAAP net income was $8.9M, but net loss attributable to Shake Shack Inc. was $0.3M, largely reflecting a one-time $138.6M tax expense from TCJA deferred-tax-asset remeasurement.

Financial highlights

• Shack sales increased 33.6% to $346.4M; licensing revenue rose 36.1% to $12.4M, with growth from 19 net licensed openings and South Korea, partly offset by Middle East weakness.

• Operating income increased 21.6% to $33.8M, or 9.4% of revenue; Adjusted EBITDA grew 28.7% to $64.7M, while Adjusted pro forma net income rose 25.4% to $21.0M.

• Net cash from operations increased to $70.9M from $54.3M; capital expenditures were $61.5M, primarily for Shack construction.

Outlook and guidance

• FY18 revenue guidance is $444M-$448M, including $12M-$13M of licensing revenue; same-Shack sales growth is projected at 0%.

• FY18 plans call for 32-35 domestic company-operated openings and 16-18 net licensed openings; domestic AUV is projected at $4.1M-$4.2M.

• FY18 Shack-level operating profit margin guidance is 24.5%-25.5%; G&A is $49M-$51M excluding $4M-$6M of Project Concrete costs, and pre-opening costs are $12M-$13M.

• FY20 targets: at least 200 domestic company-operated Shacks, 120 globally licensed Shacks and more than $700M in total revenue.