Shake Shack Announces Fourth Quarter and Fiscal Year 2021 Financial Results

– Total Revenue in 4Q21 and FY21 of $203.3m and $739.9m respectively.

– Record System-wide Sales in 4Q21 and FY21 of $314.3m and $1.1b respectively, representing year-on-year growth of 42.5% and 47.6%, respectively excluding the impact of the 53rd accounting week in 2020.

– Same-Shack sales rose in 4Q21 20.8% vs 2020 and 2.2% vs 2019.

– 13 New Domestic Company-Operated Shack Openings in 4Q21, highlighted by our first drive-thru locations in Minnesota and Missouri.

– 36 New Domestic Company-Operated Shacks and 26 New Licensed Shacks in 2021.

NEW YORK–(BUSINESS WIRE)–Shake Shack Inc. (“Shake Shack” or the “Company”) (NYSE: SHAK), today reported financial results for the fourth quarter and the fiscal year ended December 29, 2021.

Randy Garutti, Chief Executive Officer of Shake Shack, stated, “As we look back on 2021, we remain incredibly grateful and proud of how our Shack family has continued to overcome the many challenges we’ve faced. We are pleased to report a strong sales comeback in the fourth quarter with record full year system-wide sales results and same-Shack sales up 2.2% versus 2019. However, our sales were impacted by the sharp increase in Omicron cases in fiscal January, causing a decline in traffic, lost hours and Shack closures. While a return to pre-COVID movement patterns remains uncertain, we are pleased to see improvement through fiscal February, with same-Shack sales up approximately 13% month to date.”

Garutti continued, “We remain confident in our strategic investments around Elevating our People, Digital Transformation, Format Evolution with drive-thru, and our commitment to delivering a great guest experience with an eye towards accelerated growth. We believe that Shake Shack is positioned to manage through ongoing headwinds. With our largest development schedule ever and a healthy balance sheet to support continued investments, we believe we will exit 2022 stronger than where we started and are incredibly excited for this next chapter in the Shake Shack story.”

Financial Highlights for the Fourth Quarter 2021:

• Total revenue in the fourth quarter 2021 increased 29.0% to $203.3 million versus the same period last year, showing continued year-on year growth from an increase of 48.7% in the third quarter 2021. This increase is inclusive of the favorable impact of the 53rd week in the fourth quarter 2020, which resulted in incremental revenue of $11.1 million. Excluding the 53rd week, Total revenue in the fourth quarter 2021 increased 38.8%.
• Shack sales in the fourth quarter 2021 increased 28.5% to $195.9 million versus the same period last year, compared to an increase of 48.1% in the third quarter 2021. This increase is inclusive of the favorable impact of the 53rd week in the fourth quarter 2020, which resulted in incremental Shack sales of $10.7 million. Excluding the 53rd week, Shack sales in the fourth quarter 2021 increased 38.1%.
• Same-Shack sales⁽¹⁾ were up 20.8% in the fourth quarter 2021 versus the same period last year, compared to up 24.8% in the third quarter 2021. Additionally, Same-Shack sales were up 2.2% in the fourth quarter 2021 versus the same period in 2019, an improvement from down 7.3% in the third quarter 2021.
• Licensing revenue in the fourth quarter 2021 increased 46.8% to $7.4 million versus the same period last year, showing continued year-on year growth from an increase of 68.3% in the third quarter 2021. This increase is inclusive of the favorable impact of the 53rd week in the fourth quarter 2020, which resulted in incremental licensing revenue of $0.4 million. Excluding the 53rd week, Licensing revenue in the fourth quarter 2021 increased 61.0%.
• Shack system-wide sales in the fourth quarter 2021 increased 31.9% to $314.3 million versus the same period last year, showing continued year-on-year growth from up 53.1% in the third quarter 2021. This increase is inclusive of the favorable impact of the 53rd week in the fourth quarter 2020, which resulted in incremental Shack system-wide sales of $17.7 million. Excluding the 53rd week, Shack system-wide sales in the fourth quarter 2021 increased 42.5%.
• Operating loss in the fourth quarter 2021 was $6.5 million, an improvement compared to operating loss of $12.2 million in the same period last year, but showing a decline when compared to an operating loss of $2.6 million in the third quarter 2021, as inflationary pressures impacted the business and we continue to invest in General and administrative expenses to support growth and development.
  • Shack-level operating profit⁽²⁾, a non-GAAP measure, was $32.2 million, or 16.4% of Shack sales in the fourth quarter 2021 versus the same period last year, an improvement over a Shack-level operating profit of $29.6 million, or 15.8% of Shack sales in the third quarter 2021.
• Net loss was $10.3 million in the fourth quarter 2021, compared to net loss of $20.3 million in the same period last year.
  • Adjusted EBITDA⁽²⁾, a non-GAAP measure, was $12.4 million in the fourth quarter 2021, compared to adjusted EBITDA of $9.2 million in the same period last year.
• Net loss attributable to Shake Shack Inc. was $9.7 million, or a loss of $0.25 per share in the fourth quarter 2021, compared to Net loss attributable to Shake Shack Inc. of $19.4 million, or a loss of $0.50 per share in the same period last year.
  • Adjusted pro forma net loss⁽²⁾, a non-GAAP measure, was $4.8 million, or a loss of $0.11 per fully exchanged and diluted share in the fourth quarter 2021, compared to adjusted pro forma net income of $1.3 million, or a loss of $0.03 per fully exchanged and diluted share, in the same period last year.
• The Company opened 19 net system-wide Shacks in the fourth quarter 2021, comprised of 13 net domestic Company-operated Shacks and six net licensed Shacks. As of the end of the fourth quarter there were 218 Company-operated domestic Shacks and 151 global licensed Shacks compared to 183 and 128, respectively in the prior year.
• Cash and cash equivalents and Marketable securities were $382.4 million as of December 29, 2021.

Financial Highlights for the Fiscal Year 2021:

• Total revenue for the fiscal year 2021 increased 41.5% to $739.9 million versus the prior year. This increase is inclusive of the favorable impact of the 53rd week in the fourth quarter 2020, which resulted in incremental revenue of $11.1 million. Excluding the 53rd week, total revenue in fiscal year 2021 increased 44.6%.
• Shack sales for the fiscal year 2021 increased 41.2% to $715.0 million versus the prior year. This increase is inclusive of the favorable impact of the 53rd week in the fourth quarter 2020, which resulted in incremental Shack sales of $10.7 million. Excluding the 53rd week, Shack sales in fiscal year 2021 increased 44.2%.
• Same-Shack sales⁽¹⁾ increased 24.2%, for the fiscal year 2021 versus the prior year.
• Licensing revenue for the fiscal year 2021 increased 50.7% to $24.9 million versus the prior year. This increase is inclusive of the favorable impact of the 53rd week in the fourth quarter 2020, which resulted in incremental licensing revenue of $0.4 million. Excluding the 53rd week, Licensing revenue in fiscal year 2021 increased 54.8%.
• Shack system-wide sales increased 44.2% to $1,123.1 million, versus the prior year. This increase is inclusive of the favorable impact of the 53rd week in the fourth quarter 2020, which resulted in incremental Shack system-wide sales of $17.7 million. Excluding the 53rd week, Shack system-wide sales in the fiscal year 2021 increased 47.6%.
• Operating loss for the fiscal year 2021 was $15.9 million compared to operating loss of $43.9 million in the same period last year.
  • Shack-level operating profit⁽²⁾, a non-GAAP measure, increased 66.9% to $119.2 million, or 16.7% of Shack sales in fiscal year 2021.
• Net loss was $10.1 million in fiscal year 2021, compared to net loss of $45.5 million in the same period last year.
  • Adjusted EBITDA⁽²⁾, a non-GAAP measure, was $56.0 million in fiscal year 2021, compared to adjusted EBITDA of $22.7 million in the same period last year.
• Net loss attributable to Shake Shack Inc. was $8.7 million, or a loss of $0.22 per share in fiscal year 2021, compared to Net loss attributable to Shake Shack Inc. of $42.2 million, or a loss of $1.14 per share in the same period last year.
  • Adjusted pro forma net loss⁽²⁾, a non-GAAP measure, was $2.6 million, or a loss of $0.06 per fully exchanged and diluted share in fiscal year 2021, compared to adjusted pro forma net loss of $22.3 million, or a loss of $0.56 per fully exchanged and diluted share, in the same period last year.
• The Company opened 58 net system-wide Shacks, comprised of 35 net domestic Company-operated Shacks, which is net of one closure, and 23 net licensed Shacks, which is net of three licensed Shack closures.

Fourth Quarter 2021 Review

Total revenue, which includes Shack sales and Licensing revenue, increased 29.0% from the fourth quarter 2020 to $203.3 million in the fourth quarter 2021. This increase is inclusive of the favorable impact of the 53rd week in the fourth quarter 2020, which resulted in incremental revenue of $11.1 million. Excluding the 53rd week, Total revenue in the fourth quarter 2021 increased 38.8%. This growth was due in part to the opening of 35 net new domestic Company-operated Shacks during the fiscal year 2021, as well as continued sales recovery across Shack markets.

Same-Shack sales grew 20.8% year-on-year in the fourth quarter 2021, compared to up 24.8% in the third quarter 2021. This year-on-year growth was driven by continued improvement across some of our hardest hit markets such as New York City, which saw same-Shack sales up 39% in the fourth quarter 2021. When compared to 2019, we saw growth for the first time in 2021, exiting the fourth quarter up 2.2%. Both our urban and suburban Shacks saw improvement versus 2019 in the fourth quarter 2021, even with many of our highest volume Shacks still down when compared to 2019. Our urban same-Shack sales were down only 4% in the fourth quarter 2021 versus 2019, an improvement from down 15% in the third quarter 2021. Suburban same-Shack sales were up 9% in the fourth quarter 2021 versus 2019. Contributing to this improvement were our mall based Shacks, which benefited from increased holiday shopping.

Average weekly sales were $74,000 in the fourth quarter 2021, up from $72,000 in the third quarter 2021. This improvement was due to increased menu prices and strength across urban markets.

During the fourth quarter 2021, total digital sales, including orders placed on the Shake Shack app, website and third-party delivery platforms, represented 42% of Shack sales. During the fourth quarter 2021 we grew our first time app and web purchasers base by more than 80% for the full year 2021. We have been able to retain around 80% of digital sales in fiscal December 2021 when compared to fiscal January 2021 when digital sales peaked. In the fourth quarter 2021, we launched our Black Truffle Burger and Truffle Fries which started as an early exclusive on our Company-owned app. These two items were the strongest performing limited time offerings of 2021 on our digital channels.

Licensing revenue for the fourth quarter 2021 was $7.4 million. In the quarter, our domestic Shacks benefited from increased levels of air travel, especially over the holiday period. Internationally, we saw relaxation of COVID restrictions in select markets in addition to five international openings in the fourth quarter 2021. Included in these five international openings is our second Shack in the city of Shenzhen, as we continue to expand across the Chinese market. While we saw a benefit of the overall global recovery in the fourth quarter, we understand that conditions continue to remain volatile and ever-changing.

During the fourth quarter 2021, the Company opened 13 new domestic Company-operated Shacks, five new international licensed Shacks and one new domestic licensed Shack.

Operating loss for the fourth quarter 2021 was $6.5 million, resulting in a negative operating loss margin of 3.2% compared to an operating loss of $12.2 million, or a negative operating loss margin of 7.8% for the fourth quarter 2020. For the fourth quarter 2021, Shack-level operating profit, a non-GAAP measure, was $32.2 million, or 16.4% as a percentage of Shack sales, compared to Shack-level operating profit of $29.6 million, or 15.8% of Shack sales in the third quarter 2021. The year-on-year increase in Shack-level operating profit was primarily due to sales leverage as the business saw less impact from the COVID-19 pandemic, as well as lower delivery commissions as a result of lower digital sales mix. A reconciliation of Shack-level operating profit to Operating 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 increased 34.0% to $25.6 million in the fourth quarter 2021 from $19.1 million in the fourth quarter 2020. As a percentage of total revenue, general and administrative expenses increased to 12.6% for the fourth quarter 2021 from 12.1% in the fourth quarter 2020. This increase was primarily due to increased investment in our home office teams, marketing and IT to support development and digital initiatives, as the Company continues to invest for accelerated growth ahead.

Fiscal 2022 Outlook

The Company is providing revenue and sales guidance for the fiscal first quarter of 2022.

Fiscal first quarter and fiscal year 2022 guidance is derived from recent trends and does not assume material changes to the current operating environment, inclusive of any potential further COVID impacts.

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 28, 2022. The timing of a return to pre-COVID sales 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. The timing of that recovery remains unknown today. Furthermore, there is uncertainty around the cost pressures facing our business due to inflation. As the Company approaches the two year mark in mid-March 2022 since the initial and extensive impact of COVID-19, it remains cautious about the near-term sales outlook, especially in its urban business.

(1) Includes approximately $12 million of the approximately $13 million total Equity-based compensation.

Earnings Conference Call

As previously announced, the Company will host a conference call to discuss its fourth quarter and fiscal year 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 February 24, 2022 by dialing (844) 512-2921 or for international callers by dialing (412) 317-6671; the passcode is 13725684.

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 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 more than 240 domestic locations in 32 U.S. States and the District of Columbia and more than 125 international locations including London, Hong Kong, Shanghai, Singapore, Mexico City, 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, guidance for fiscal 2022, expected Shack openings, expected same-Shack sales growth 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,” “outlook,” “potential,” “project,” “projection,” “plan,” “intend,” “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 Form 10-K for the fiscal year ended December 30, 2020. All of the Company’s SEC filings are available online at www.sec.gov, www.shakeshake.com or upon request from Shake Shack Inc.

Contacts

Media:
Kristyn Clark, Shake Shack

(646) 747-8776

[email protected]

Investor Relations:
Melissa Calandruccio, ICR

Michelle Michalski, ICR

(844) SHACK-04 (844-742-2504)

[email protected]

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