SHAK - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Shake Shack First Quarter 2018 Earnings Call. At this time, all participants have been placed in a listen-only mode and the lines will be opened for your questions following the presentation. Please note that this conference is being recorded today, May 3, 2018.

On the call today, from Shake Shack, we have Randy Garutti, Chief Executive Officer; Tara Comonte, Chief Financial Officer; and Josh Omin, Vice President of Finance and Investor Relations. to call like to I'd now turn over the Mr. And Omin. Josh

Josh Omin

operator. the Financial Thank all to everyone. earnings have good By evening to be in you, in can first release, Info section. And our now which XXXX quarter investor.shakeshack.com, found access you should

be on our Additionally, we our as exhibit to can site for first the the Events earnings materials, quarter or have in XXXX & X-K quarter. posted which supplemental found Presentations section an

including to begin remind them. which not of on that not February may and our today formal include on indicated due we these differ filed a statements, our guarantees reliance performance, Form Actual need from the will XX-K XXXX. forward-looking I by Before discussions everyone remarks, those future Risk Factors on place undue should discussed annual our those forward-looking are in results therefore, and report statements, section you of number materially uncertainties, XX, to of risks

represent statements as update if change. views forward-looking no of our any forward-looking any to assume we our obligation Additionally, and statements today, only views

the will in we a for performance. this our discuss Reconciliations GAAP. The measures results available information release, in GAAP of are financial be we believe measures, call, in as supplemental earnings can evaluating be presentation today's During the additional not accordance with should our isolation aforementioned which of or useful considered in non-GAAP prepared appendix substitute to comparable materials. and

our Randy I'd turn Now over Garutti. like to call CEO, the to

Randy Garutti

a quarter bottom solid as build growth. everyone and call off report on XXXX today. start the I'm line Josh, we to to Thanks, that fourth top good momentum, evening pleased is upon our delivering to and strong

a community, Shacks we existing To XX%. committed understanding new continuously a company-operated by some We guests, capture EBITDA We strategic increase focused relentlessly continued leveraging built plans. four on growth. on an executing we grow, nearly the achieve elevating our significant building opened driving Shack provide the the accountability, adjusted by X.X% deliver quarter, profitable globally, and licensed to including as in want digital we've opportunity to brilliance, These Shack upon performance and and focused growth continue our strength principles, revenue basics Shacks initiatives update brand first connected supported of and of guiding business of expand results growth and Shacks. and our of sales, experience to on same-Shack grew solid and plans. strength with loyal, Shake to we domestic infrastructure key XX%, a we'll excellence, which evolution are is the both and During these our delivered the year-over-year our the international five Shake strategies foundation Today execute on were I of growing, growth deeply we're the to our smart ahead. believe on hospitality. and

guests our constantly them and wish. innovation as ever, to with also our First, we've pipeline, and to while testing into Shake our license business both continued new ensure been systems, And both core infrastructure, as than people our excited our digital healthy We're our Shack well year's of class menu this the innovating executing it significant existing that We're the working to international lies as of as ahead. than to Shacks. which menu, also ever globally. they regions on make ever about our support better considering categories. and We're foundational growth wherever easier our expansions better and to domestically across we're investing focused experience whenever for across development our and remains in connect

company-operated expect first end the between in Shacks and to company-operated XXXX. domestic new continue opened domestic five the Shacks XX we quarter, of XX Towards and

a a strategy, heavily new our with XXXX of opening of in for is year, planned XX% of existing the second reminder, with our XX% approximately and half portion XX%, in will openings our across the Shacks Consistent scheduled fourth be markets, the weighted, As our markets. quarter. roughly with remainder significant back-end of schedule those the our

It's execute our to simply mixture are in destination do, we've and well During with Houston's a group Florida this eighth extended to continued build format further North to of the with freestanding example and of Denver, stall This end, fans Southern Also, with our important opened smaller premier Shack have legions markets Angeles, breweries New another local first new Shack the and the Charlotte, is Since to of multi-format Shacks. loyal market our new a on unable and strategy, other that Shacks With our downtown ideas unwilling of host guests we as pop-up first just events to Southern thrilled adding in total quarter a we yet new Shack north way Village, Colorado, urban, the shopping dynamic launched just in existing globe. companies enter. quarter throughout Mall, in from first quarter, inside Los also RiNo District, community South Jersey. California. build Aventura we at We're of core with chefs partners, Downtown the in great continuing markets or Rice our as of Shack Denver. we've around also our excitement the the for a Carolina. opened

York, and entering California, have current markets. Seattle, year, our Florida, We footprint the planned while Nashville, into of this Francisco, exciting new markets San Cleveland, more deeper in more, and Texas, our growth New expanding

in Shacks both opened between South Shacks continued and the XXXX our opened goal our pipeline XX during Korea We we Asia, strong Internationally, our with our long-term of XXX open target we to East as and XXX. XXXX. and licensed Middle new domestic by of and execute first domestic to in licensed toward company-operated the quarter, Japan. XX expect is Shacks in growth furthered international in additional Shacks continue Our four and expansion

last in so Mall, an brand opening, we location to tremendous international cities incredible Hong fact, Shack of to at license from lined of our prior night, I'm media our returned amount our throughout fans the and captured In just earlier the in premier power of Asia. and Kong, with of the moment for demonstrate Maxim's. was the Shack of the a word that first Hundreds world. Shake up of team partner company. This a the Kong. Hong our I week great the this The excitement opening in and IFC energy spread the our across continues opened proud

meaningful development focused years, three our going planned South international Asia, growth Shanghai with Kong, see Japan, a part next Hong of next to you're Korea, the year. and in Over in

these significant whitespace internationally. regions new as well there's We as markets are confident in

investing on environment, Now rapidly the and we're today's focusing than evolution make shifting experience In strategies move let's personal the and continued innovation ever. to experience. and Shack more consumer the to digital of Shack in Shake convenient

base, year, we on while the our the our our better with digital that Shack and engage acquire deliver further to opportunity fans, continue fan we've Over ability enhance also, increasing past new to can guests, expanding to grown understand and our experience. current

browser-based gather and to how and launch we like of costs of the mobile channel visit-based enhancing campaign, key self-order for test download of and Shack. app. goals a has both service, a planned kiosks year. expand our This these on may Shake cashiers. Veggie looking with within, or connect ordering and We're number Shack, with with and improving guests also to desktop and guests, testing Shacks a whether ecosystem Shake to this loyal recent It further combination we which degree guest best offers Our digital opportunity the capabilities, this to we mobile become reward kiosk-based some can an the which app expand who will ordering, the our the app which of increasing plan to to started ago. learn on guests, our continue to later that guests entire not and of kiosks extensively prefer offset of couple have. of We're our a throughout ordering the basis, learnings around labor weeks through will our be to at quarter, experience And We'll speed experience, providing the continue availability for retrofit continue

during valuable Shake testing. believe do to Shack uplift the in for gaining the we delivered, which including with across key In pilots the our encouraged be we've our through and quarter. order been new conducted Throughout multiple we demand positive delivery in and sales results, integrated DoorDash, guests We're can we additional ways and first service seeing integrated learn engage, X test Postmates, partners. Caviar the XXXX, continue packaging by Grubhub. areas, feedback test we to first continued and a with We're saw of from months guests

remains as it For unchanged. delivery, our now, strategy to relates

comes night, will little to us and a By that on for to term. if the learn, all a time for enter a test so basis time business and deliver long we're strong we'll into it continue and the formal do We thoughtfully will healthy economically for partnership, hungry. us when or the getting this of

lot So I now. and want worth to which categories excitement, most We're happening our learning LTOs are across testing exploring. We've innovation right which and got the menu. drive new to a move on

in in Texas. crispy our first type So Shack giving Griddled an as different a from feedback various Chick'n and during testing to Club ever a begun Veggie guests, option just in staple since of we ChickenShack, LTO, locations based our Also, we've core has XXXX. menu California on our a been created which York, guests QX, our chicken of years New our

brown from will which feedback black this We're guests. initial test served Our and for come rice, own that from also learn beans beets, the vegan. from to innovation, excited be made in limited our and can

week, this and cheddar lineup, cheeseburger, barbecue on barbecue bacon a Just smoky cheese cheddar our a barbecue also griddled chicken. cheddar new a featuring new and LTO, a bacon and we both introduced

the test chef about up we'll test the drive at office, Coachella, even and excitement, collaborations our and and innovative, staying that years our new With innovative guest burger new also and some fans core summer excited for a test continue streamlined operationally frequency, this home quarter, dedicated ran cooking Shacks. the at for to did menu test offerings of overall and first be kiosks. with all opening to serving really come. pop-up more kitchen our in of during true We creations our new the our we're in while We're to thousands effective and out music to a desert going fun satisfaction,

Lastly, and year. systems we are strengthening committed to our teams this

always we've investments operational in plans, will our be support financial a we're previously, systems and Tara give we're through and little invest to on shared important you Furthermore, to update in most going a core Project to people, will our asset. our that brief Concrete. making later. As key who bit our are continue

celebrate Retreat. the Leadership success such less one hard force at special This that are we leaders, our result very to looks and of going on members Shack Biannual a event forward to today XXX their forward important of principle Shack the our Shake Our the behind than together build training to, nearly time upcoming operations. amazing driving power and us it's In guiding our future is culture. our is for everyone build leaders to strength leaders who a that weeks, bring of and X a we're work celebrate, an excited and are as team

new will We're the including Overall, menu to a happy opportunities so is development. forward home office Varick innovation, focus Street design our dedicated I'm off space center on officially we've our XXXX for excited into moved to to our new and leadership this provide, City. New and solid that start. in new to on our looking enhanced kitchen about team, we're report York area Finally,

are Tara, strategic to to it through execute forward. this turn take who We initiatives With company will laser-focused to that, continue you on will our that the great numbers. drive I'll key continuing over

Tara Comonte

the East both the our $XX.X Randy. Shacks quarter XXXX. sales new since $XX.X from XXXX, company-operated to million, increased Within revenue of Total newer of revenue to company-operated licensing Japan, increase in by to pressure million. quarter to some XX of business, due net performance to revenue, first as remain XX.X% Middle our includes XX.X% license and thrilled Shacks company-operated Shacks balanced of driven Thanks, year. since continued XX.X% primarily ongoing of increased we strong the $X on domestic quarter Shacks as addition which see last for first Licensing Shacks South the the our some XX Sales Korea by increased million, from well of our same operations.

first recognition of We'll comparison has standard implementation on our which include a of revenue timing to the accounting You reduction methodology, under some in footnote agreements. may impact remember reported our $XXX,XXX of the revenue the of the XX-Q that in each revenue the licensing new an new in of the approximately as old revenue quarter. our and a of impact show of was for

We traffic. which Same-Shack X% guidance. is year revenue and X.X% over including the This a the incorporated to price we sales increased full expect X.X% be of partially the mix, recognized, X.X% X.X% our first less impact December, in offset during the $XXX,XXX XXXX consisted in by to took approximately increase in increase a into decrease price that quarter.

we burger with we connection of the launch year in promotion the mobile ran reminder, the first free a quarter As lapsed app. our in last

quarter, traffic first burger sales, free Excluding X.X% promotion, all our with associated have would positive been the X.X%. declining same-Shack in transactions with the

quarter to sales, another Shacks XX to included highlight same-Shack half of our system. comparable in first we're than posted the continue in company-operated quarter to While number Shacks, the only that the sequential total Shack important report it's of less pleased base

were for the decline as shift. In winter we've be at lower for strength our as Shacks is company-operated Northeast, the In this and addition, due sales the by can micro balanced storms volumes relatively base the compared Shacks an a decrease base days regional the of by majority multiple holiday our negatively. positively Northeast to of quarter, in and quarter swayed the of last first shared Shacks or and are by to in the the country, addition trends, our both This XXXX, uplift of small few in again the $XX,XXX quarter the pilots our to therefore, supplemental of domestic system. comp-based impacted materials, geographically-concentrated weekly the prior the comp of first the X% delivery as year. well Average and from Easter of in newer was

$XX quarter As Shacks for the end the for add prior $X.X the full of as continue average unit non-GAAP Shacks grew in the company-operated first quarter to across of million we XX.X% the Shack-level million $X.X to AUV represents is at operating system, This $XXX,XXX of million. to system of broader profit, quarter the $X.X pace our AUV of million. decrease was the the guidance and measure, range a AUV a volumes trailing a on XX-month for year year. throughout to remainder XXXX to compared first

XX.X%, percentage first percentage other to sales related lower-volume well expenses by that a with quarter. favorability costs sales during as introduction part by sales related of of quarter, basis in and ongoing timing regulatory XX.X% increased XX.X%, prior slightly Other as of points year-on-year we pilots with fixed As expansion of first and XX versus our of total last during the the a new to the quarter certain XX to I of base, environment, number expenses year. higher year primarily percentage the Shacks year's the in full expected, and our at the to in million compared X%, number digital costs as experience facility declined number XX.X%. improvement year year increasing of paid costs offset of as driven mainly of and ongoing the to quarter new paper system, build-to-suit our ingredients. first were promotion. and XX% of to Shack-level quarter costs Shack prior as the top non-cash by was Shacks, in Shack openings menu points year Shacks product between as related minimum XX due the commissions we as increased Shack add fall operating and healthy Shack to by support of expenses margins due as sales the expenses quarter These increases driven Food remaining mature, Labor of our in office. and quarter. XX the operating percentage wages, did with an of during a basis quarter, and headcount development Shack costs in associated prior price an by basis Occupancy from agenda, Shacks and the rent delivery We increases lower-volume basis first increased ran in the deferred addition strength by integrated free of driven the increase of as that primarily last growth, G&A This and impact $X.X performance decreased the accounting. our beef points our technology for our our points the line leases points guidance decreased line to basis to approximately burger increasing earlier of mentioned XX to a XX.X%. a offset under

while XX.X% material stages and quarter, make remainder Although same will exchange the client-based as expenses In progress that forma and ramp revenue per the significant earned $X.X to year on $X.XX pro of up in have And our $X.X we we project first in there relation quarter, Costs Project in XX.X%. had as to Act. $XX.X of Concrete, EBITDA $X.XX of Jobs of of rate deemed from share expect quarter million total Cuts Stock-based compared now making we upgrade costs million. and final adjusted and impact first the design benefit initiative, we in within we selection EBITDA Tax are prior we and million an $X.XX a platform. in quarter, diluted operational compensation the in on do this or the didn't to effective corporate the spend selection. intended these XXXX vendor implementation first prior our tax move systems the year. fully light under results the the a or financial the $X.XX throughout basis, adjusted a the through year in year. was margin was in minimal will benefit to is the our the did a related operating percentage Adjusted phases, be majority last Included also current these from lower a same quarter of the in quarter and grew

previous $XXX XXXX as our an fiscal Moving on for $X We're million, guidance increase approximately over and XXXX. we $XX XX% $XXX million of revenue, million the to the impact between by full mentioned this expectations. to million to our the year revenue of raising revenue revising follows: guidance to standard year full expect licensing XX% Within million new revenue, total earlier. to continue including $XX total of

approximately planned those to second in on Korea and half I Hong and quarter. a our continue to rate XX% between company-operated development growth reiterate of XX% of new want XX between the our international We domestic openings is launch our weighted, Kong. Japan, growth schedule expect new with and XX unit of to heavily our in licensed XX%. open net Shacks, focused and representing to in that the the with Shacks fourth South majority recent of the XX year, XX XXXX

deleveraging introduction labor on in a starting our the sales possible volatility; call, be on profit the the first namely hourly lower-volume our and same line, with significant expect for $X.X volume expectations, previously. year the X% QX We're deleverage increasing wages; to we're all factors in by to the slight million label depending and Shacks impact mentioned of reiterating COGS our continued to the our investment account approximately between I fiscal impacted market sales increased year operating to Shacks continue not quarter for the XXXX teams. X had guidance for by the between major X% We from Shack-level full margin beef company-operated on flat last full into XX.X%, positive Strong experience Taking million. XX.X% same-Shack system; and did results, average flat line, the we $X.X between for in and deleverage. to and driven unit

remains on a be carry However, that year, on volumes, to line XXX we broader the as XX and certain range facility XXXX level. significantly a which labor deleverage XXXX, pressured We deleverage delivery Other sales at will basis. deleveraged Shacks of our experienced potential full of will range expenses year commissions. on costs new of the this broader line labor full in opening to a fixed expect similar and a increasing sales year-on-year given basis the operating a due year Shacks volumes, our be expenses XX basis to points mature expectation on

Moving G&A. to on

to growth plans. of increase will to Project We our exclusive million, and between the and million expense continue Concrete our $XX line expect during G&A be core year investment costs. in $XX with Spend

this Concrete, I work. million earlier, configuration good we selection. and on systems the made As project, $X million making close $X to investment this of ultimate required estimate progress of final mentioned continue to implementation Project depending point, we've an a for scope on and of to we're At and the level platform selected capabilities

the As nature, the in progresses, majority identify We'll onetime. as spend fall these noted XXXX. addition, mostly be earlier, which into portion and a of to project we may expect to operating be costs in

$X.X we interest continue effects XXXX XX% We pro million for of for which costs tax and to $X of expect between any $XX related compensation. forma million potential And effective of million. adjusted between and to million XX%, and expense And between stock-based continue $XX excludes and to be approximately million. treatment an accounting rate to depreciation tax expect $XX preopening the

some January impact will on comments new take provide XXXX. initial standard to that want I finish, we lease the Before in of accounting the effect

with liabilities, We right-of-use estate operating for number real standard, our the of majority accounting be are leases estate significant of balance Today, these under corresponding to leases, likely the considered on new the obligation full sheet a purposes. the of capitalized have leases will assets. and real leases as

lease recorded to line. occupancy payments the this of of is cost they at terms our as lease that incur operating general continue that in the such, understanding within be over Assuming classified P&L term impact, our time will we

share of impact specific the still And both full standard, treatment leases. as are, more the including of we'll and future impacts however, have existing We we the build-to-suit them. evaluating

to I'll remarks. closing pass with back Randy So for that, you

Randy Garutti

incredible Thanks, nearly Tara. some sharing executed X years and teams domestic atmosphere beautifully. I Hong week.Our international this just this work experienced launch, our the on I at do want worked of Kong for to opening was their close hard today and

our opened just spoke the team doors, opening. reminded before partners see that it. a with and every we line around greet we message the members door. at the we I And guest As nearly Every deserve world. not I or this them may One share regardless, On line. day, may the at don't of Shack people at us in day, earn every we must time, a I

Now we day we're day again, day hours every open that strong the a moment Kong, and up. of up luckily, in lined forward, remind opening it. I yet for letting XX without hundred And to team going work hard on Hong our to remained that on earn

drive with That team the Beyond special and us. culture growth. go the thankful company than And opportunity will operator, continuing what of these This line ahead, today's our and pride a is of want guide With greatest for you to for that with special and ahead a I questions. ride you ever. gratifying may the open point stronger that, you're on call. we're joining thank remains is results, what hospitality our is always our is

Operator

And Instructions] Miller our Jaffray. take Nicole [Operator from from question Piper first we'll

Nicole Regan

questions I afternoon, had this please. X

of different kind kiosk on? user, or early any First looking? how, do satisfaction get from are a feedback your albeit you guest delivery scores And

Randy Garutti

take bit. little I'll a So

and backup do in in pretty that about shared, particular different guest a any we say, satisfaction, had particular, really channels externally, internally, data-based surveying, haven't follow. We I on would Nicole. we're lot obviously, both bit anything, through it. a little of social happy have that this, without we We

it's hear openings, those. bit. there's a listen I always and best how that always to and say and I that continue guess, we mistakes make to is similar to quite it's have And different the about just It We it learn we ranges. way there's we think excitement, been. and then,

often Astor, be we're to We keep to and doing X next works. the think go of about forced our to And clearly too this it. It'll when do a going too, early really have about be well the things So pay we like at want to now pay myself In in project that told there's us, interesting Shacks with Place, this cashiers people phase, all quarter. do X is really next not of to ahead that for did to and you're I cash. learned, why But or as It's at What the yet. our pertains to operators rollout clearly, it's the as we've we at it young have sharing here going there. are As with have cash what how first guests to we'll accept us stood lot want kiosks. We there coming rollout, seen a learning time want "We who the And very is often. we all. some do for in people kiosks, there a not use probably us. it. next just talk Astor to like we're kiosk cash."

Astor keep is. we'll So it as

learning. that digital the think number hands. evolution We I keep the put otherwise. Shacks of point of But and we in We'll have whole testing the your of listening power a want company the is to

who got to If want you. be orders we you on the app, a person

it delivered, to got want have we If you. you

we're that want to your make a that human ways. so wait you If greet different we with you to to sure want a doing smile. call. can't in talk many And But it's we being, to

that way So answer the it I best is without can any particular data backup.

Nicole Regan

I the employee satisfaction. to just, want is which that's understand the guests, And helpful. understanding

you estate could hurdle big growing the and a growth nearly XX% So task, barriers. or is about real people. But XX% is unit the real talk

training of to things uniquely for in what So retention? hiring, market, or this are doing kind labor you of be kind positioned

Randy Garutti

it's so Nicole, Yes, important.

culture You everything. very and know precedes our well, us

real our even said best few I come times of We year, team. we remarks, things. offering we doing our why constantly one month. reinvigorate of sure ways our the versus look together. a benefits we multiple This sit our added package in the in It's this got all program of where As to with we're the We're my We retreat at Starting our best turnover that That's we're that. part we industry. some to can. make and enhanced we pay proud our leaders.

ever We've who led month got also in answer. just that thing battle. watch, a Shake have instilled it Shack. tough and same And But I and and a team. the now, ask to we're with, we It'll But have Kong years no will it a Shake I'm about a from dozen culture good her big And we'll industry, Peggy a our I'll an thing what. our think be to and amazing of growth. is Kong of this the it's high always toughest And sweet culture, All XX the always matter proud Hong our It's it's But pretty is we me on it. focus training spot of of Hong sense culture, it. does and that turnover. said, will challenge so when team how be it's US the my Rubenzer at have Shack's the you that most. question, thing such during moved there as deal was especially trainers with always by incredible teams for over

Operator

our take Blair. William we'll from And next Sharon Zackfia from question

Sharon Zackfia

right the of Project benefits to going provider potentially a talk are try of about be going adjusted delivery, on kind doing kind question which this or On you advantages secondarily, and And Concrete, then, testing you're figure EBITDA delivery, I'm Concrete. versus of or include clarification a onetime on single what from and Project approach, is confused. that multi-pronged work? ongoing doing elements now? just a EPS to could then, on little the Are there elements, ongoing are costs you adjusted the to out a excluded exclude how going year operating to is A

Randy Garutti

Do Project you take to want first? Concrete

Tara Comonte

Concrete take I'll Sure. Sure. Project first.

extent we in one And numbers. then and obviously yes, year that will So adjust numbers, we costs the therefore, we'll those and identify EPS incur to our them in adjusted our as we time, that for this report. EBITDA

Randy Garutti

questions on relationship. have jump We've the what between being And is great would exclusive thing. can learning on really, delivery, this good done wide that. differences in conversations tests has go a some delivery we're I out we nonexclusive. On demand being long-term everybody or the those back months on there. last, And partners, -- you this We're on, we're moving think now. for exclusive, still we're shown just there's We debate, willingness whether -- the for make six testing. some if that nonexclusive. their regional why open that's is Sharon, everybody to But

learning, standpoint, and delivery on a we from going going there testing, to keep what keep based learn. So we're

Sharon Zackfia

are mean, how the offered wide Randy, are the you, to that I economics depending provider? on

Randy Garutti

Well, I that competitive think we that's thing wouldn't a share.

the for for an this and Shack brand think got company's long opportunity build it our that for team. relationship, for calling, work. has carriers, any to every cost And everyone. term. the right the their has work metrics a be it's I and it a Shake Like Ultimately, got good company, great the for way needs make to to

we'll choose. in So again, rush once so. no on we do that to But land we're

Operator

our from Bartlett And SunTrust. we'll from next take Jake question

Jake Bartlett

through the at way would would about you're be And first so how question, if that the of in time, And this helpful. you? Easter same X% then, you How you as can in then, of a any quantify lift on you and effect much thought it the second suffering guess, have about the the of what comp these anticipate delivery comps would pretty shift be to comps weather if March last month. question But pilots, from a up the quarter? kind nor'easters impact. did talk can And can kind large four negative kind there's impact I drove quantify had help I getting that impacted we quarter. I negative if well, that.

Randy Garutti

as comp out which Boston materials at Yes. Jake, questions. York in huge breaking down, say New piece, the than of But it's comp the a up, our we will corridor Amtrak do, if quarter. X, don't is it anything, on each you portion when look gave supplemental don't I I was we're base, to of going all could get this good we to say of more Without from think with it's or we're City. D.C., Page me sideways continued positive that which happy XX% base on whether story wrong, our our

Nor'easters, balance yes, by we're certainly have impacted look, we that. But time. things X out So when those over

these about delivery that, we're comp We're time, as which XX% a think, excited out course, good, Shacks continued was hopeful, said, balance as we've strength of positive. always, that'll over of more. over base the I new regional out, just the actually had and some things that. than less gets performance We this some of there, balances of was

the few in And quantify for bit the to right? not. sometimes what means York us, days. really in really things those sometimes It's Easter In question, it's terms a related little hard school particularly, New depends shift, then, to Northeast, schedules just on of a Easter, Easter because

last some because So say, days then some in we're you of the positive hard period shift, we happening of not some travel, and usually out which believe saw of to responding that that But really because sure. few from. uptick April. and it's shift the We do benefit had schools

we lots quarter, second quarter watch in not as on guidance in, any there going second So the we're the right give to come to but now.

Jake Bartlett

X.X% driving like giveaway comp, it. impact for price. free then, of the the you composition And Got check the the X% check about What even And out the have -- I of the Looks the kind it. year. X% was last check and just negative traffic. the burger guess, to growth a with growth? of of Got backing

there is So

Randy Garutti

this generally there. important all and on A to We've have X.X you've seen you got things points have we going is we few year, channels, Yes, And which X. been about talk the last check. Yes. all then, higher an but note, to as got our thing clear, digital average digital you initiatives. Jake, price, about a

contributes more that We're still what will the So look long channels. on term we app, kiosk there working delivery tests. through at mean the when through

good So mix our innovation. engineer started seen it some already as to continue well price a of we've that. of and the be in increase good We to accretive, because all menu as drive things those menu to to innovation

Jake Bartlett

Got it.

like wasn't quite? that, something hits the LTO that it good it or might that So chicken old wasn't an

Randy Garutti

factors digital. it. all Mostly again, those But play It into digital. is the mostly the

Jake Bartlett

Thank you very Okay. much.

Operator

from And JP we'll from question take Ivankoe John our next Morgan.

John Ivankoe

then, just if could separate a you Actually, If I orders missed digital's is a driving on and question. percentage or check, already say your follow-up your I what apologize of that, total that. sales currently digital?

Randy Garutti

John. yet. we're not that out by that ready of We growing weren't Again, coming we to last to We're as encouraged that integrated. year be just out not have in but delivery category to really just didn't a we not, it, add Obviously, number we break outside services yet. continue breaking that have delivery

the of to combo app a over that's has the opportunity kiosk, with delivery, we that chance in and that. lot investing heavily we're an So grow think of and future,

JohnIvankoe

the at than, Can or that I you least the walk-in [indiscernible]? Is walk-in guess, how say check is digital check much higher ticket?

Randy Garutti

about sometimes Yes, on That more. depending XX-plus, it's channel. roughly XX%. we've talked been about, But the

JohnIvankoe

in. just All helpful. a number a right, plugging actually think I but more that's a from than And perspective, then, it's question important modeling

in new to XX% about rest of You kind are but XX% of in. markets, units are fill the talked in new your

guardrails I just to new a total volumes 'XX new you there's us at unit you unit volume for volume volumes any 'XX put fill-in. average market having experience your average unit fiscal giving solve and average, market number around opposed we was of us of think not as of for you as a you're hoping guidance to a unit that implicit If if can new for between fill-in will, versus some forward. in of expectations that about volume. kind and allow And comp So a in as just some kind average going kind and look terms and

Randy Garutti

the you necessarily market mean And to a new mean fill-in examples. it's couple A why. doesn't example I'll of restaurant. an that. really give hard a think doesn't necessarily I'll always I always high-volume do is reality restaurant. lower-volume John, a give a you

going fill-in, we're Birmingham. shown continue And to past, going to will to region I is think don't as go We smaller our to be, Southern said, for add Shake a in to but would California. restaurant in we're we but I town. Nashville, going go what go Denver? San to right? don't we've Probably. that Francisco, interesting might This grow, eighth Interesting, That, a be the right? to when we then, know Shack, as a year, considered I they're something high question. equal in AUV those

hard So it's just so to do that.

had just that QX. the low kind show by, be balance spectrum. proud in some QX the these that of and towards of year, too. all be excited through with this And of. average the really really million will average openings we're end we have in generally full of starts. think was which at encouraged those there, of AUV hopefully, a continue in we which big end We've $X to and we've we'll $X expect As number this early both our strong But to that million, as places, we expect of But balanced openings to We the openings out. again, go. year, we about over But the said,

to give but that model, know the term low for is again, right million bet. those it's probably hard over you I So $X your long the

JohnIvankoe

will that Nashville that sure a unit, Okay. guys. perfect be Understood. I'm sounds And market you for your like

So of seeing this, G&A mean, an leverage? in how points much, XXXX as your finally, forward when very talked nice know you certainly, there's your are lot think as you When to But year have that. to of that. again, opportunity overall do layout I that to does G&A And look about longer-term begin think high kind I to percentage leverage? basis to beginning we revenue we of of some that reasons enough then, a is And guys G&A a for about, know, objectives. average margins? you guys be of maybe, on you been can kind contributor per

Tara Comonte

know, the not today. invest shorter would John, G&A. to that's I in course, yes, on you see and us we're as that, much top it as the mean, term. looking forward-looking you for that we G&A we I given guidance long we're relates at -- call of about But as haven't of the I'm course, to that, I say of guidance think of expect mind term. guidance, G&A very level And

is on an operating stage on is continuing to now right with investing cost got really we foundation for journey, be to a over some G&A that, to such returns the X-year will term, think journey, I of both would so plans. execute leverage. long term. down across and Longer early and will get those we've focused right the longer-term growth good strong Project will So expect enable while growth, make Concrete to a also the thing to leverage, business healthy margins our in Concrete cash, help be within growth further we're strong then enable that that to us and against to that do target, sure Project delivering example.

mind, So it top goes investment. I with short-term would but of it's very much say

agenda with And returns. and leverage. things. it G&A so various sense. we and more spend sustainable it'll marketing or initiatives, really experiment one for believe the happy And quantify where in growth you'll see example, we again, you long-term makes our long-term, us might we're spend It'll drive where of fact, X do continue personalized test as see we to to returns, And us digital continue with as

John Ivankoe

to opportunity? guess, a based you I big to 'XX very a the call. continue mean, apologize is can kind to of on long-term think But on do think high-investment I pushing you versus assume company going tailed leverage you a that I want 'XX? do issue show remain such you're for Or what just

Randy Garutti

You said it.

We've we Concrete. like say, think John, to what get today. I to Project looks through expect, it's hard got 'XX

that guidance X-year long doing new We're As doing enough?" more may spending it I looking we sit you're given as in believe in need office investing 'XX a it for long I at us we have your for costs the say, we're there things around, on that "Are the I our we quarter kitchen. And shareholders spend And moved G&A, the of last what our our are this up but for in Tara money. to and well. you're responsibly. said, some we've hitting our We're prudently. term But know we high doubling us. We've our units of just and think into and in Those we people want the end time, term. if we and test than doubling get that sales, believe to

So this is a great company.

X and how what really to And years we're the take in to you team. work money that's want that we we've If look next so. IPO, our X proud since some years, the just costs a performed the at do of of for do

Operator

And we'll Morgan Stanley. take our John Glass next question from from

John Glass

and question to to back average sure volume numbers wanted make come talking about. understand I unit the I you're the

For weekly $X.X a million, number the you to this $X.X $X.X average your year, million you're million. sales million. heard I if already you're $X.X think, as at I take quarter, saying well, but

million to if what relative So $X.X that those was the numbers that I heard correctly?

Tara Comonte

that to of as months towards move of million-ish. John, better trying you give we kind and $X more to we go, target, rolling XX give So try you as visibility long-term update a we're

the fiscal full heard was million trailing system-wide materials $X.X of AUV of So or same at the XX-month 'XX. I of XX one number thing XX-month certainly and supplemental QX. first the I million system-wide we time end And our at The of was the trailing first Shack we trailing my but set if that gave AUV it the gave first gave number, don't $X.X and that in we million. time $X.X was the of you months number that for think, QX the end time know

John Glass

to million, That's weekly, $X.X the not is? that, at will And current to a or million? what would is this have that to in Is come how $X.X difference between $XX,XXX come the out out $X.X quarter, What Okay. million be? million that just does that number. $X.X it trailing which and the average then, relate

Josh Omin

Josh. is this John, is just quarter… XX-week first $XX,XXX for The the

Tara Comonte

Versus months. XX the trailing

Josh Omin

XX, million. Versus $X.X the is the trailing which

million that of fiscal one be fiscal by So XXXX. it's expect the the $X.X end million. quarter full to X that 'XX through between XX of or the $X.X 'XX, point, year quarter of Again, year trailing and we by

quarter historically, seasonally in quarter. see two, historical four back way, the to a down seasonality remember little We kind quarter, a a then, by quarter just is one three the tend generally a from of $XX,XXX, in perspective. for ramp-up and prospective, a the quarter So from slower that, bit of

John Glass

look there three normalized traffic, sense. a look makes talk on more non-comp not less one foot to how want positive But at then about, to pattern to broader to stores look question, measure There's if traffic way in opened of I weather? the XX way is don't For another those and two about maybe, the traffic to they've numbers. year way to on you was you a at been a some And or than give years that the stores, and understand probably example, that Northeast, That in they're roughly, excluding to basis? a talk suddenly footfall at the is weather. than there traffic were is

Randy Garutti

John, never we to other really Shacks, impacts again, don't regional that things weather, always have Again, about variations broken stories here. time. what guidance based talked about. to price that a on we on that at much continue talk the based There's this moment. intend have over we Trying similar to us on and and on give we've the as other out, to differing based all clear But overall we can

to we're something going yet. apologies, regional on break just not a but basis or So out Shack-by-Shack

John Glass

it. any role Was there? there mentioned in quarter? this out two whether or call Would know I you one say that the quarter at you least maybe cannibalization in quarters traffic played just any

Randy Garutti

be past. Shacks a often we're to want some after. a is capture others. I what mentioned to in share what That by always is it's group design of when that similar There's really think market we going we've impacted by the are to total

we're we've other enter As there and about about when when they said I sometimes have concerned regions the are It's and Shacks, dollars. fast and mean, Shacks. and impact a that are go many less an add many we grow Shacks we're on percentages, impacted. rule concerned other times, more larger we after and it not are hard market, Shack-by-Shack that But question. that's a There differs. some much

market continue to term. the long for decisions those ultimate that share to going make give we're So us

Operator

Stump Longbow Alton from our from take question we'll Research. next And

Alton Stump

on to of first but harp as any the part you can both is estimation quarter? during also breakout that kind you comps, give of comps us from impact quickly Easter -- or there Just as and weather

Randy Garutti

out. really not it we're Alton, breaking

As openings recent of we'll whether of with base lot to new what base delivery, say this X.X%. about, to broader the are got careful time, part impacting to weather, is that of of comp by that, that again, you forever, Shack. over not. the that Shake into got But the a talked hard blended I indicative we end grow into few trends base be impacted, little Easter say. the about comp, continue the of its I always talked positive the to terms had and quarter of as in be bit not we're a going to a excited shift. But that. bit X.X% were at said we've something It's earlier, probably, to little of We've do all earlier. reported factors days a a more breakdown is much all a We're we which Shacks, continued

Alton Stump

That's their If then, you in that me handy? number are many helpful. in are the could And Manhattan? stores base that have of comp remind how actually you

Tara Comonte

the How stores many of comp Manhattan? in existing are base

Alton Stump

Yes.

Tara Comonte

XX.

Josh Omin

of the we the -- had quarter, XX were in which base a in stores was XX There in Manhattan.

deck. supplemental buildup this You then, York and Mid-Atlantic can see in the and City, the Northeast New and do We a other. all both

units the and the actual sales. about of Manhattan represented of So XX% XX% again,

Tara Comonte

supplemental XXXX, And New York get also what X added comp City. that highlighted XX of to the of them you'll in in in materials see Shacks Alton, the only that base the are

It heavily still Randy gradually mentioned. they're that So dominated diversifying. corridor by that Mid-Atlantic is

for base entering with have, among the we the So year. this comp Arizona, example, with others, first time for California,

Alton Stump

thanks Great there.

Operator

next from question Karen we'll our And Goldman Instructions]. [Operator take Sachs. from Holthouse

Karen Holthouse

versus dynamics. Hi. back into dig for -- I checks to the traffic want

right? mixed driven that things -- some year, the coming and And you is through falling that. There's digital no reason really real think you the in saw growth sounds at like looking like we So move about we as or this that check something quarter, anticipating? been growth should if it had that's by

Randy Garutti

was as was little different. last is the There said, is free that different. well some promotion was number as we talked part against as we a built digital Karen, quarter all things. of initiatives into a year, about of that it Every bit of menu of burger innovations. every price, that Well, were earlier initiative comping

in with with innovation changes each LTO, quarter. that each So changes each menu

those for was it first the reasons. what quarter, that's are and So the

Karen Holthouse

sort the growth can if was year Well, I be as beginning of trying guess, year? of in understand to that out, quarter-to-quarter. the was this of, plan for Or comp positive I'm the embeds different upside an you the guidance -- these quarter check that things surprise? the pointed sort Was or at

Randy Garutti

the the of But rest on Everything that guide now to you year. X.X% our know, the And it's said, believe took for base the on in guidance that at our December. the as to Based flat at say. to embedded of year. sort X% is -- going the price the we comp X we X.X% guidance of we Yes. we to embedded X had end to beginning gave the zero We're we quarter. comp of the we of hard in after that is in that, X

Karen Holthouse

you. Thank Alright.

Operator

Bernstein take question we'll Jeffrey from our next from And Barclays.

Jeffrey Priester

is view have third, in And quarter, one on for The from first the in the X.X% fourth quarter? clarification guide a I raise that actually is This for Bernstein. purely and follow-up. Jeff change X, over just no correct? the and to zero question second, your flow-through there's in a Priester Jeff comp the

Tara Comonte

the number and our I But Yes. of small we've volatile less factors, mean, representing a a business. base one this than point, Correct. is first in again positive the Shacks. quarter impacted very on call, many the of of most out performance. laid still and metrics obviously as times this this pleased it's by with half total at It's we're have

throughout year compares indeed, absolutely. get on that, And the of the top harder. So

your summary is yes, So correct.

Jeffrey Priester

hindering the What Got guys of kind to traffic hindering the little base comp layout of size the it. view different way. that? question current more traffic? specifically, kitchen a positive is to kitchen factor do then, you And your a of bit ask And or as

Randy Garutti

there's think, I Well, nothing that it. hinders

base As many are restaurants the is connected restaurants. group of that times, we've small a said comp incredibly regionally high-volume

of some constantly it's those in with kitchen at. we're initiatives add constantly We're that checks, looking And you base. average impact digital at when something have the larger on an looking of to So some our But they continue the up the we'll and of at the and designs base. Shacks, kitchen are built, majority new test testing Shacks mature that. We're design. new make

something continue and want of So improve it's can. we to hard at what here. all the to traffic always looking that on whenever But we're into gets is obviously

Jeffrey Priester

it, Got great, thanks.

Operator

are questions. there no further it to Randy. I'll And turn back over

Randy Garutti

Again, appreciate a on to and of for quarter, for thanks, good taking with everyone. Thanks strong to Take team We really tonight's looking your we're forward another all the support. Thanks care. us time our call. year.

Operator

conference. today's concludes for your participation. Thank you That

disconnect. may You now

Shake Shack (SHAK) 5 May 182018 Q1 Earnings call transcript