Shake Shack, Inc.

Greetings and welcome to the Shake Shack first quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A 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. Please note that this call is being recorded. I will now turn the conference over to our host, Anna Lee Leggett, Senior Manager of Investor Relations and FP&A. Thank you. You may begin.

Thank you, and good evening, everyone. Joining me for Shake Shack's conference call is our CEO, Randy Garuti, and CFO, Katie Fogarty. 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 gap measures are available in our earnings release and the financial details section of our quarterly shareholder letter. 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 February 18, 2022. 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 first quarter 2022 shareholder letter, which can be found at investor.shakeshack.com in the quarterly results section or as an exhibit to our 8K for the quarter. This shareholder letter is a new, more in-depth format replacing our prior supplemental presentation. I will now turn the call over to Randy.

Thanks, Annalie. Good evening, everyone. You'll notice our remarks tonight are going to be a bit shorter than prior calls as the team has provided a new shareholder letter format. which dives much deeper in the numbers, visuals, and strategic plan. We hope you'll spend some time with this excellent new report. So before I get into the results of the first quarter, I want to highlight our team members. Now more than 10,000 people strong in the United States and many more working through our licensing partnerships abroad. We recently hosted our Board of Directors meeting at our newest drive-thru shack in Orlando, and it gave us a chance to tour the market and reconnect with our leaders and team members across the six shacks in the region. who are driving our recovery every day. I'm continually amazed at how many of those leaders have been with us for so many years and how many have graduated up through the Shack development experience to become general managers, area directors, and more. Shake Shack is led every day by an extraordinary culture, and it's these people who continue to lead our recovery and the thriving business we're building ahead. After being significantly impacted by COVID waves in January and February, Shake Shack's performance rebounded in March, we've experienced meaningful improvement in sales and traffic trends that have continued through April. This highlights the momentum Shake Shack creates as offices, travel, events, tourism, and consumer mobility trends improve. Total revenue grew 31% year over year as we generated over $203 million in total revenue and over $309 million in system-wide sales, with average weekly sales improving through the quarter and in April as traffic has rebounded in both urban and suburban markets to more seasonal patterns. Our same-shack sales grew 10.3%, even after the significant Omicron waves early in the quarter, with our urban same-shack sales posting 19% growth over last year. We expect these overall trends to improve further into Q2. Our licensed shacks in the U.S. and in select global markets performed well, offsetting significant ongoing COVID impacts in Asia. We generated shack-level op profit of 15.2%, driven by sales levels and ongoing and volatile inflationary headwinds. Given the persistent inflation we've experienced and expect to persist in the near term, we took a menu price increase in March, in addition to raising our premium on third-party delivery orders. We're currently running about 6% to 7% increase to menu price over last year, excluding the impact of delivery premiums, and we'll remain patient as we watch pricing closely through this bumpy period of cost inflation. I'll provide a brief update on the four pillars of our strategic plan. First, our focus on elevating our people. In just a few weeks, our SHAC leaders, home office, suppliers, and licensing partners are coming together for our leadership retreat, focused on development and building our team member bench that is so critical to achieving our accelerated growth goals. I hosted our first ever retreat in 2009 with just nine attendees. This upcoming retreat will bring together more than 1,200 leaders. I'm thrilled that our culture and the growth we've created can now provide this opportunity for learning across the SHAC globe. This remains a challenging time for hiring, retaining, and developing our people, which is why this is where we are focusing investments and where you can count on us to continuously strive to be better employers, providing solid wages, benefits, and most importantly, opportunity to make Shake Shack a career choice for the long term. Second, we remain committed to our digital transformation, and we're ramping up investment in every digital channel. Through the ShackTrack digital experience, whether you want your shack in our app, web, kiosk, drive-up, curbside, delivery, and now drive-through, we're building tools to add even greater convenience to the omni-channel shack experience. Even as in-shack sales rose significantly year-over-year in the first quarter, we continue to drive digital engagement, retention, average check, and higher frequency through these channels. All this takes time, and with every click, we're getting to know our guests better, connecting with them more directly, and building touchpoints that can set the foundation for long-term growth. Third, we continue to evolve our shacks, focused on format evolution and development expansion. We opened seven company-optioned shacks in the first quarter and two more in April. We opened up six licensed shacks in the first quarter, including a strong market opening in Nanjing, China, and two more in April, including another market opening in Guangzhou, China, bringing our total system count to 386 SHACs as of fiscal April end. Since December, we've opened five company-operated drive-thrus, which are an exciting and transformational step in providing even greater convenience than ever before. The experience at our drive-thrus feels great. We know we have much to learn and evolve. With at least five more drive-thrus set to open this year, we're optimizing for fast learning We see this as a major piece of our growth strategy ahead. And while we're really excited about our pipeline, COVID and supply chain-related delays in permitting, construction, landlord readiness, and equipment availability remain intense, and in many instances are impacting our planned opening timelines. Since the beginning of this year, we've pushed a number of openings into 2023, and as we stand today, we expect to open 40 to 45 company-operated shafts with a back-weighted schedule to the fourth quarter. In our licensed business, we're actually running ahead of our initial development plans and expect to open between 23 and 27 licensed shacks this year. In our licensed business, we continue to experience recovery around the globe in our airport and stadium shacks here in the U.S. Yet, our business in China remains significantly impacted today. COVID lockdowns and intermittent market interruptions across China are impacting near-term licensing revenue, creating uncertainty for this important market for the foreseeable future. As we look towards growth in our licensed business, we see this as a massive white space opportunity. Our brand resonates around the world, and we're taking this time to expand partnerships and open up new markets. This week, we announced that we'll be expanding to Thailand with a target of 15 shacks over the next decade. We also recently announced our expansion to Malaysia, We've got our sights set on more licensed growth opportunities with strong partners in key international markets. Finally, we're relentlessly focused on our guest experience through our shacks and our products. We just wrapped up our Buffalo Chicken and Fry LTOs, and this week we've launched our newest LTOs featuring our Bourbon Bacon Jam Burger and Chicken Sandwich. We partner with Maker's Mark to create a delicious summer menu. And don't miss out on our slate of summer lemonades and shakes. As always, our food raises the bar. I'll now pass over to Katie to discuss our financial performance in more detail.