Shake Shack Inc (NYSE:SHAK) reported financial results for the fourth quarter and fiscal year ended December 30, 2015, periods that included 13 and 52 weeks, respectively.

Financial Highlights for the Fourth Quarter 2015:

  • Total revenue increased 46.8% to $51.1 million.
  • Shack sales increased 49.2% to $49.3 million.
  • Same-Shack sales increased 11.0%.
  • Shack-level operating profit*, a non-GAAP measure, increased 88.1% to $13.9 million, or 28.2% of Shack sales.
  • Adjusted EBITDA*, a non-GAAP measure, increased 104.5% to $9.9 million.
  • Net income was $1.2 million, or $0.07 per diluted share.
  • Adjusted pro forma net income*, a non-GAAP measure, was $2.9 million, or $0.08 per fully exchanged and diluted share, compared to an adjusted pro forma net loss of $(0.3) million, or $(0.01) per fully exchanged and diluted share in the prior year period.
  • 9 system-wide Shack openings, including three domestic company-operated Shacks and six international licensed Shacks.

Financial Highlights for the Fiscal Year 2015:

  • Total revenue increased 60.8% to $190.6 million.
  • Shack sales increased 63.5% to $183.2 million.
  • Same-Shack sales increased 13.3%.
  • Shack-level operating profit*, a non-GAAP measure, increased 96.8% to $52.9 million, or 28.9% of Shack sales.
  • Adjusted EBITDA*, a non-GAAP measure, increased 117.7% to $41.1 million.
  • Net loss was $(8.8) million, or $(0.65) per diluted share.
  • Adjusted pro forma net income*, a non-GAAP measure, increased 154.9% to $12.0 million, or $0.32 per fully exchanged and diluted share, compared to $4.7 million, or $0.13 per fully exchanged and diluted share in the prior year period.
  • 21 system-wide Shack openings, including 13 domestic company-operated Shacks and 8 international licensed Shacks, representing a 33.3% increase in system-wide Shack count.

* Shack-level operating profit, adjusted EBITDA and adjusted pro forma net income are non-GAAP measures. Reconciliations of Shack-level operating profit to operating income, adjusted EBITDA to net income (loss), and adjusted pro forma net income (loss) to net income (loss), the most directly comparable financial measures presented in accordance with GAAP, are set forth in the schedules accompanying this release. See “Non-GAAP Financial Measures.”

Randy Garutti, Chief Executive Officer of Shake Shack, stated, “We are very proud of what we have been able to accomplish in our first year as a public company. 2015 marked a record year for Shake Shack in nearly all metrics, and we will continue to execute our stated growth strategy and connect with our guests the world over. During the fourth quarter we opened three domestic company-operated Shacks and six international Shacks including our first Shack in Tokyo in the Meiji-Jingu Gaien park. Looking ahead, 2016 is shaping up to be another outstanding year with a strong pipeline of new domestic openings, and plans to enter four new markets.”

Development Highlights

During the quarter, the Company opened three domestic company-operated Shacks, including additional Shacks in the Las Vegas market, in Downtown Summerlin, and two additional Shacks in the state of New York at Woodbury Commons in Central Valley and in Queens Center Mallin Elmhurst, New York, executing on the development plan for fiscal 2015 by opening 13 domestic company-operated Shacks. Subsequent to the end of the quarter, on February 26, 2016, the Company opened its first Shack in Scottsdale, Arizona in the Fashion Square shopping center. Additionally, the Company opened eight international licensed Shacks, including the first Shack in Japan inside the Meiji-Jingu Gaien park, surpassing its development plan for fiscal 2015 of six international Shacks. Subsequent to the end of the quarter, on February 6, 2016, the Company opened its first Shack in Oman in the City Centre Muscat shopping center.

The Company plans to enter several new markets in 2016, including: (i) Los Angeles, with the first Shack in West Hollywood, CA on Santa Monica Boulevard and a second in Glendale across the Americana at Brand; (ii) the Arizona market, in Scottsdale, at the Fashion Square shopping center and Phoenix, AZ, in the iconic Uptown Plaza; (iii) in Dallas, at Uptown’s 11 acre office and retail complex, The Crescent; and lastly, (iv) in the Twin Cities’ Mall of America. Internationally, the Company plans to enter South Korea, with its new licensed partner, SPC Group.

Fourth Quarter 2015 Review

Total revenue, which includes Shack sales and licensing revenue, increased 46.8% to $51.1 million in the fourth quarter of 2015, from $34.8 million for the fourth quarter of 2014. Shack sales for the fourth quarter of 2015 were $49.3 million, an increase of 49.2% from $33.1 million in the same quarter last year due primarily to the opening of new Shacks, robust sales at mature Shacks, as well as same-Shack sales growth. Licensing revenue was $1.7 million for both the fourth quarter of 2014 and 2015. Licensing revenue from the eight new international licensed Shacks opened during the year were offset by lower licensing revenue from Shacks in the Middle East and the negative impact from foreign currency exchange rates.

Same-Shack sales increased 11.0% for the fourth quarter of 2015, on a calendar basis, versus 7.2% growth in the fourth quarter last year. The comparable Shack base includes those restaurants open for 24 months or longer. For the fourth quarter of 2015, the comparable Shack base included 21 Shacks versus 13 Shacks for the fourth quarter of 2014.

Average weekly sales for domestic company-operated Shacks was $89,000 for the fourth quarter of 2015 compared to $85,000 for the same quarter last year, a 4.7% increase, primarily due to traffic growth, increased menu prices and favorable shifts in sales mix from menu innovation.

Shack-level operating profit, a non-GAAP measure, increased 88.1% to $13.9 million for the fourth quarter of 2015 from $7.4 million in the same quarter last year. As a percentage of Shack sales, Shack-level operating profit margins increased 590 basis points to 28.2% as a result of higher flow through from lower than anticipated food costs and the leveraging of labor and other operating expenses on the increased Shack sales. A reconciliation of Shack-level operating profit to operating income, 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 to $7.7 million for the fourth quarter of 2015 from $6.0 million in the same quarter last year. As a percentage of total revenue, general and administrative expenses decreased to 15.0% for the fourth quarter of 2015 from 17.2% in the fourth quarter last year, due to the elimination of the management fees paid to USHG, as well as $1.2 million of IPO-related expenses incurred in the prior year, partially offset by $0.8 million of expense recognized during the quarter related to a legal settlement and incremental stock-based compensation expense related to stock options granted in connection with the Company’s initial public offering.

Adjusted EBITDA, a non-GAAP measure, increased 104.5% to $9.9 million. As a percent of total revenue, adjusted EBITDA margins increased approximately 540 basis points to 19.3% compared to 13.9% for the year ago period. A reconciliation of adjusted EBITDA to net income, the most directly comparable GAAP financial measure, is set forth in the schedules accompanying this release. See “Non-GAAP Financial Measures.”

Net income was $1.2 million, or $0.07 per diluted share, for the fourth quarter of 2015, compared to a net loss of $(1.4) million, or $(0.05) per diluted unit, for the same period last year.

Adjusted pro forma net income, a non-GAAP measure, was $2.9 million, or $0.08 per fully exchanged and diluted share during the fourth quarter of 2015, compared to an adjusted pro forma net loss of $(0.3) million, or $(0.01) per diluted share during the fourth quarter of 2014. A reconciliation adjusted pro forma net income (loss) to net income (loss) is set forth in the schedules accompanying this release. See “Non-GAAP Financial Measures.”

Fiscal Year 2015 Review

Total revenue increased 60.8% to $190.6 million for fiscal 2015, from $118.5 million for fiscal 2014. The growth in Shack sales was primarily driven by the opening of 13 new domestic company-operated Shacks, as well as same-Shack sales growth.

Shack sales for fiscal 2015 were $183.2 million, an increase of 63.5% from fiscal 2014. Licensing revenue for the fiscal year was $7.4 million, an increase of 13.6% from the prior year. Same-Shack sales increased 13.3% during fiscal year 2015 versus 4.1% growth in the prior year. For fiscal 2015, the comparable Shack base included 21 Shacks, compared to 13 Shacks for fiscal 2014.

Shack-level operating profit, a non-GAAP measure, increased 96.8% to $52.9 million for fiscal 2015 from $26.9 million for fiscal 2014. As a percentage of Shack sales, Shack-level operating profit margins increased approximately 490 basis points to 28.9% due to higher flow through from lower than anticipated food costs and the leveraging of labor and other operating expenses on the increased Shack sales. A reconciliation of Shack-level operating profit to operating income, the most directly comparable GAAP financial measure, is set forth in the schedules accompanying this release. See “Non-GAAP Financial Measures.”

Adjusted EBITDA, a non-GAAP measure, increased 117.7% to $41.1 million from $18.9 million for the fiscal year. As a percent of total revenue, adjusted EBITDA increased roughly 570 basis points to 21.6% compared to 15.9% for the year ago period. A reconciliation of adjusted EBITDA to net income, the most directly comparable GAAP financial measure, is set forth in the schedules accompanying this release. See “Non-GAAP Financial Measures.”

Net loss was $(8.8) million, or $(0.65) per diluted share, for fiscal 2015, compared to net income of $2.1 million, or $0.07 per diluted unit, for the same period a year ago.

Adjusted pro forma net income, a non-GAAP measure, was $12.0 million, or $0.32 per fully exchanged and diluted share for fiscal 2015, compared to $4.7 million, or $0.13 per fully exchanged and diluted share for fiscal 2014. A reconciliation adjusted pro forma net income (loss) to net income (loss) is set forth in the schedules accompanying this release. See “Non-GAAP Financial Measures.”

2016 Outlook

For the fiscal year ending December 28, 2016, the Company is providing the following financial outlook:

  • Total revenue between $237 million and $242 million.
  • Same-Shack sales growth between 2.5% and 3.0%.
  • At least 13 new domestic company-operated Shacks to be opened in 2016 (of the previously stated guidance of 14 new domestic company-operated Shacks, one was opened on the last day of fiscal 2015), with these new Shacks expected to have average annual sales volumes of at least $3.3 million and Shack-level operating profit margins of at least 22%.
  • Seven licensed Shacks to be opened under the Company’s current license agreements in the U.K., Middle East and Japan, as well as a new licensed Shack in Las Vegas’ T-Mobile Arena (of the previously stated guidance of eight international licensed Shacks, two opened ahead of schedule in December 2015).
  • As a percentage of Shack sales, approximately 100 to 150 basis points of deleverage in labor and related expenses on a year-over-year basis.
  • Adjusted pro forma effective tax rate between 43% and 44%. (Original Source)

Shares of Shake Shack are falling nearly 8% in after-hours trading. SHAK has a 1-year high of $96.75 and a 1-year low of $30. The stock’s 50-day moving average is $36.80 and its 200-day moving average is $42.75.

On the ratings front, William Blair analyst Sharon Zackfia upgraded SHAK to Buy, in a report issued on January 19. According to TipRanks.com, Zackfia has a total average return of 2.3%, a 47.6% success rate, and is ranked #1077 out of 3698 analysts.

Shake Shack Inc is a roadside burger stand. The Company along with its subsidiaries operates and licenses restaurants in the food service industry, serving hamburgers, hot dogs, crinkle-cut fries, shakes, frozen custard, beer and wine.