Shake Shack, Inc.

Greetings and welcome to the Shake Shack first quarter 2021 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rick Powell, Senior Vice President of Finance and Investor Relations. Thank you, Rick. You may begin.

Thank you, Paul, and good evening, everybody. Joining me for Shake Shack's conference call is our CEO, Randy Garuti, and President and CFO, Tara Comont. During today's call, we will discuss non-GAAP financial measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are available in our earnings release and the appendix to our supplemental materials. Some of today's statements may be forward-looking, and actual results may differ materially due to a number of risks and uncertainties, including those discussed in our annual report on Form 10-K filed on February 26, 2021. Any forward-looking statements represent our views only as of today, and we assume no obligation to update any forward-looking statements if our views change. By now, you should have access to our fourth quarter 2021 earnings release. which can be found at investor.shakeshack.com in the news section. Additionally, we have posted our first quarter 2021 supplemental earnings materials, which can be found in the events and presentation section on our site as an exhibit to our AK for the quarter. And with that, I'll turn the call over to Randy.

Thanks, Rick, and good evening, everyone. Really happy today to share the continued comeback and forward momentum here at Shake Shack. Spring has ushered in a great energy around the country in our hometown of New York City, too. With COVID cases stabilizing and more regions steadily loosening restrictions, we're optimistic that improving trends can continue for our industry. As always, I want to start with a shout-out to our team members who've worked through so much hardship, and now with a full year of the pandemic behind us, they're still leading the way back to our resuming growth. We move forward today with confidence for the opportunity we see ahead. In the first quarter of 2021 and so far through April, our financial performance continues on an upward trend, Total revenue was at $155.3 million in the first quarter, up 8.5% from last year, with average weekly sales improving to $64,000 compared to $62,000 in the fourth quarter. We exited the first quarter with March average weekly sales of $68,000, improving again to $69,000 in fiscal April. Same-shack sales were up 5.7% in the first quarter and up 86% in fiscal April versus 2020. We'll also be sharing sales comparisons for the current comp base versus 2019, as this was down 14% and 15% in fiscal March and April, respectively. Suburban checks continue to lead our recovery, with April nearly flat at down just 1% versus 2019. In terms of profitability, check level margin was 15% for the first quarter, exiting with March at just under 19%. Let's move now to talk about our strategic focus and priorities. Because we've moved through this period of continued sales and profit recovery and to the significant opportunity ahead, our team is focused on opening and operating great Shacks. We're executing on the evolution of our physical Shack formats and digital transformation while maintaining a critical focus on the creation of great products and an elevated guest experience, all culminating in enhanced convenience and access for our guests and an expanding addressable market for Shake Shackers. Highlighting growth during the first quarter, we opened 10 domestic company-operated shacks and have opened another five so far in Q2. We expect to open between one and three more through the end of this quarter for a total of 16 to 18 new shacks by the mid-year point, an incredible accomplishment by the team in what has continued to be a challenging operating environment. As we look to the back half of the year on the various state of permitting or construction of our 21 class, we expect the remaining shack openings to be more weighted to the fourth quarter. Assuming no unforeseen COVID-related delays, We're on target to open between 35 and 40 new company-operated SHACs this year across both urban and suburban markets, although more weighted to suburban as we continue our market penetration strategy. We continue to guide to an accelerated development plan of 45 to 50 SHACs next year in 2022. Towards the performance of the SHACs we've opened so far this year, we're really encouraged. Average weekly sales for our 21 class was over 79,000 in the first quarter, more than 20% higher than the system average. Some of our most recent openings in new markets such as Boulder, Indianapolis, and Portland resemble the excitement previously seen before the pandemic, with lines around the block and strong sales out of the gate, encouraging indicators for the robust and accelerated development plan we've laid out. Our newest shack in Fishers, Indiana, just outside Indianapolis, features our second shack track drive-up window. And we've also opened new shacks in Santa Monica, L.A., Hoboken, New Jersey, and more. ShackTrack Digital Convenience leads with about a third of the class featuring walk-up windows, about 10% with a drive-up window, and many other shacks featuring curbside and or enhanced interior pickup experiences. Additionally, we're making a big commitment to testing drive-thrus, now with the potential for up to eight of these planned through 2022. We expect to open our first at the end of this year. Turning to the recovery and growth of our license business. We currently have 16 shacks temporarily closed due to COVID impact. However, during the first quarter, we opened two new international shacks in the Middle East with six additional openings in the second quarter through fiscal April, mostly in Asia. We saw improvement in total weekly sales performance throughout the first quarter, increasing from 5.6 million in January to 6.3 in March and 6.6 in April. The recent increases have been driven by both our international and domestic license checks, especially in airports that are experiencing increases in TSA traffic. We're also thrilled that all of our baseball stadium shacks have now reopened, including our newest, within the World Series champions, L.A. Dodgers Stadium. With limited fans allowed at games, we don't expect to have a normal sales season, but we're delighted to be bringing Shackburgers back to the ballpark. So far in the second quarter, our U.K. shacks are gradually reopening as the country finally ended most of the lockdown restrictions for the first time in over three months. Our shacks in China have seen strong sales throughout the second quarter so far, and our recent openings in Macau, Beijing, and Singapore continue to extend our footprint in these key strategic regions. As we look to the future and the importance of the Asia-Pacific region, we'll soon be expanding within China's southern region with our first shack planned to open in Shenzhen later this quarter. We're targeting to open between 15 to 20 new licensed shacks in 21, increasingly between 20 to 25 in 22. Our license operations are a critical component in how we will scale our business and our brand, and we expect them to grow substantially over the coming years. Moving on, the pivotal transformation of our digital business, which continues to perform well. We're intensely focused on investments that we believe have been and will be critical to our growth. Traffic frequency, marketing opportunities, all leading towards greater convenience and accessibility to and for our guests. During the first quarter, we fully launched delivery from our own app. I'll be adding web later this year. Offering delivery within our own channels is a key step in our ongoing digital and sales growth strategy and allows us to build strong relationships with our guests and enable more personal and direct communication. We're also working to improve in-app communications, particularly to enhance the pickup notifications experience. And within our shacks, we're testing screens that communicate order readiness to our guests. We've already seen guest experience scores move higher where these initiatives have been rolled out. As in-person dining restrictions ease, we're excited to see our in-shack guests return, all while we continue to strengthen, build upon, and amplify the digital gains we've already made. And finally, at that time of the call where we start to get a little bit hungry, in Q1, we began the limited run of our Korean-style chicken menu. And this launched with really high guest demand and a large amount of buzz. so much so that many of our shacks actually sold out. And while this led to curtailed menu availability in February, we ended the promotion strong in March, having learned a lot that will help us prepare for more chicken LTOs later this year. Currently, we're running a new avocado bacon burger and our chicken shack, topped with freshly sliced avocado and diamond ranch applewood smoked bacon. This will be available for a limited time nationwide, and for the first time ever, in addition to these items, guests can can also have freshly sliced avocado added to any of their favorite burgers. Over the past few months, we've increased focus on our shakes and cold beverage categories as well. Our limited-time offerings here are proving to be increasingly popular. Our spring lemonade trio, for example, featuring strawberry salted lime, blackberry lychee, and mango passionade, contributed to an increase in beverage items per check since launching in early March. These have made up over a third of total cold beverage sales. nearly doubling the sales contribution of previous beverage LTOs. We've got some fun additions in these categories coming in the coming months, and we'll continue to deliver an inspired LTO calendar featuring bold flavors and modern, fun versions of the classics in an effort to continue to elevate everything we do. Finally, on the culinary front, during the first quarter, we launched a new chef collab series named Now Serving. which features a diverse group of local chefs and restaurateurs from across the United States to help us cook up exclusive limited-time menu items. We've had lots of fun running successful culinary collabs in the past, but this year, coming out of the pandemic, we're using these events as an opportunity to feature and give back to our local restaurants, strengthen our brand, and more deeply engage with our communities. A portion of the net proceeds from each collab will go to nonprofit organizations helping local restaurant communities. Finally, I want to highlight our recently published annual Stand for Something Good report, which highlights many of our ESG priorities in 2020 and beyond, and includes for the first time the publishing of our five-year diversity goals for our company. We embody our mission to stand for something good by prioritizing the well-being of our team, sourcing premium ingredients from like-minded producers, committing to responsible crafts and design of our shacks, and actively engaging in community support, support through donations, events, and volunteering. We know we can and must continue to do so much more to offset our impact on the world and make Shake Shack a leader in creating opportunities to drive positive change. I encourage you all to read the report, which can be found in the investor section of our website. Now I'll pass the call over to Tara for more detail on our financial performance.