Shake Shack (SHAK) Q4 2018 earnings summary

Executive summary

• FY18 system-wide Shack count rose 31% to 208 after 49 openings; revenue increased 28% to $459.3M and system-wide sales rose 26.3% to $671.9M.

• Same-Shack sales grew 1.0%; Shack-level operating profit increased 22.3% to $112.9M, while Adjusted EBITDA rose 14.2% to $73.9M.

• Year-end cash, cash equivalents and marketable securities totaled $86.9M; no revolver borrowings were outstanding.

Financial highlights

• FY18 revenue was $459.3M, operating income $31.7M, net income $21.9M and net income attributable to Shake Shack Inc. $15.2M; diluted EPS was $0.52.

• Q4 revenue was $124.3M; operating income was $2.8M, net loss $0.5M, attributable net loss $1.0M and diluted EPS $(0.03).

• Adjusted pro forma net income increased 28.0% to $26.9M; Adjusted pro forma diluted EPS was $0.71 per fully exchanged share.

• FY18 operating income included $3.9M of one-time costs, including Project Concrete costs and a $1.2M legal settlement.

Outlook and guidance

• FY19 revenue guidance: $570M–$576M, including $15M–$16M licensing revenue; same-Shack sales growth expected at 0%–1%, including ~1.5% menu price increases taken in Dec. 2018.

• FY19 plans call for 36–40 domestic company-operated openings and 16–18 net licensed openings; domestic AUV is forecast at $4.0M–$4.1M.

• FY19 Shack-level operating profit margin guidance is 23%–24%, including ~50 bps impact from lease accounting adoption; operating profit expected to rise in absolute terms while margin declines.

• FY20 targets: revenue above $700M, at least 200 domestic company-operated openings and at least 120 net licensed openings.