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spk04: Greetings and welcome to the Shake Shack third quarter 2023 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 our host, Michael Riolo, Senior Director at P&A NIR. Thank you, sir. You may begin.
spk09: Thank you, and good morning, everyone. Joining me for Shake Shack's conference call is our CEO, Randy Garuti, and CFO, Katie Fogary. 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 financial details section of our 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 on February 23, 2023. 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 third quarter 2023 shareholder letter, which can be found at investor.shakeshack.com in the quarterly results section or as an exhibit to our AK for the quarter. I will now turn the call over to Randy.
spk15: Thanks, Mike, and good morning, everyone. We're really proud of the team's strong and sustained execution of our strategic plan. Shake Shack remains laser-focused on profitable growth. This quarter we grew total revenue by 21% to $276 million, with 2.3% growth in same-shack sales. We achieved average weekly sales of 74,000, trailing 12-month AUV across our shacks at $3.9 million. We grew system-wide sales by 24% year-over-year to $439 million as we built shacks across new and existing markets. Sales began the quarter strong in July and moderated a bit through the end of the quarter in September. However, October has re-accelerated with same-shack sales over 3.5% as we increased various digital and in-shack marketing initiatives, driving October traffic well above September trend. In the quarter, we continue to improve profitability, increasing shack margins to over 20% again, with expansion of 400 basis points year over year. We grew third quarter adjusted EBITDA by nearly $16 million to $36 million, up over 80% year over year. And we improved our adjusted EBITDA margins by 430 basis points, growing from 8.7% last year to now 13%. We also continue to grow our footprint around the globe, opening 25 shacks in the third quarter, 10 company operated, and 15 with our licensed partners. We're on a path to open approximately 80 shacks this year system-wide, roughly 18% unit growth, and we are building a robust pipeline of growth in the coming years. Our licensed business continues to perform, and we see tremendous white space in this highly accretive and asset-light part of our business. We expect to open approximately 40 shacks this year and approximately 40 more in 2024. With a fair amount of global macro and geopolitical headwinds, we expect to navigate a more challenging environment in the coming years. And this is why we've built a diverse portfolio domestically and around the globe to help offset regional volatility. We'll move deeper in existing markets with proven and newer formats like drive-thru, as well as enter several new markets in the coming year. In our company-operated business, we've opened 30 shacks so far this year, well on our way to open approximately 40 before year-end. Looking ahead, we have 20 shacks under construction. And if you recall last year, we had a much more heavily-weighted fourth quarter. We're really proud of the team for better executing a balanced year with a strong class of 23. And our 24 pipeline is solid as we target approximately 40 new openings next year. We're also working through new prototypes for the long term, with a 2024 target to bring down our net investment costs by about 10% from today's average costs. Now let me give you an update on how we're tracking on our strategic plan. Our first priority has been on recruiting, rewarding, and retaining a winning team. And similar to what we reported last quarter, we've achieved some of the best turnover and retention numbers we've seen. and we're generating more than twice the team member applicant flow compared to last year. Not only are our team members staying longer, competitive wages are also attracting more candidates, which is contributing to better operational execution and profitability in our shacks. This commitment to our workforce remains unwavering, and we're constantly exploring avenues to enhance their experience and provide more opportunities for career growth within the company. Our second priority is a relentless focus on our guest experience. We continue to execute a broad culinary strategy of improving our core menu while delivering exceptional LTOs that keep operations running smoothly and efficiently. In July, we offered our Bourbon Bacon Burger, which sold out quickly at the start of August. We pivoted to marketing a core menu favorite, our Avocado Bacon Burger and Chicken Sandwich, before launching our Hot Chicken and Spicy Schachmeister Burger at the start of September. And while guest reception for our current hot menu has been solid, We do have a tougher compare towards the end of the quarter as we lapped last year's launch of our Hot Ones LTO, which started off especially strong due to the very high number of media impressions we received with that partnership. We've also been featuring Spicy Fries, one of our strongest fry LTOs to date. Our lemonade lineup featuring Harvest Berry, Cherry Hibiscus, and Kiwi Apple has also resonated well with guests. As we look to the rest of the fourth quarter, we're excited about additional brand building opportunities in culinary. including our holiday shake lineup that just hit Shaq's yesterday. We've teamed up with Universal Studios for their launch of the Trolls 3 movie, Trolls Band Together, and we'll be serving a series of shakes based on characters in the movie, highlighting Poppy's sugar cookie, complete with blue and pink cotton candy topper that resembles the iconic troll's hair, Branch's chocolate peppermint, and Viva's cinnamon roll. This is our first national offering in partnership with a movie, and we're excited for these delicious and fun shakes just in time for the holidays. Many of our shacks are proximate to movie theaters, giving us the opportunity to benefit and play a unique role in partnering with films. And we have an engaging marketing strategy lined up around trolls, including bold messaging, advertising in many shacks, as well as social media activations. Some of our shacks will even have special activations for kids this coming weekend, including glitter bars, coloring stations, and photo booths. Our third priority, our targeted development strategy and improving returns on our shacks. Our recent openings have performed well, including a number of drive-thrus as we continue to learn more about what makes an optimal Shake Shack drive-thru site and build out. We opened four more drive-thrus in the quarter and one in October through Washington State, Utah, and Texas, bringing the total to 21 company-operated. We'll continue to score well with our guests on overall satisfaction and order accuracy, and we're proud to win an Innovation by Design Award from Fast Company, highlighting our team's work. That said, we know in drive-thru and in shacks generally, some of our biggest areas of improvement remain consistency, speed, and throughput. And this is going to be a big focus for our designs and operational improvements through 2024. Our licensed business showed strong performance overall in the quarter as we opened our first resort shack in the Bahamas at the Atlantis with a dramatic format that includes a full-service bar. Later in the quarter, we opened our second shack within Incheon Airport in Seoul, and we continued deepening our footprint in China. Our domestic licensed shacks performed well by continued strength in U.S. airports and the opening of four more domestic roadside shacks, which we believe can be a growth opportunity for us. We remain highly confident in the long-term trajectory of our licensed business, but we do expect that geopolitical pressures and uncertainty, namely in the Middle East and Asia, could present pressures into the fourth quarter and into 24 in terms of our number of openings and sales. Our fourth priority, driving more profit in our shacks. The team is doing really great work, focusing on the profitability opportunities in our restaurants. We expanded our third quarter restaurant margin by 400 basis points year over year to 20.4%. Our second consecutive quarter where our restaurant margin grew back above 20%, showcasing the continued progression of our strategic priorities. We're winning share in our own more profitable channels, and our kiosk rollout has made our best channel even better from a profitability and guest experience perspective. There are many pressures that lay ahead, including an unknown consumer backdrop and beef inflation. However, we are focused on driving continued improvements that help us outperform historical patterns in light of these cross-currents. And finally, the fifth pillar of our plan, as we build an enduring business, we are committed to investing with discipline. We're deploying capital towards strong returns in four main areas, building shacks, updating current shacks, investing in digital infrastructure, and structuring our home office capabilities to support our restaurants. We're moving purposefully to address opportunities in the supply chain, operations, leveraging G&A, and long-term cost to build. We remain committed to reducing build costs next year by about 10%, as well as pre-opening costs by at least 10% per shack, as we continue to lead with disciplined capital allocation in 24 and beyond. We're excited to see our strategic plan driving improvements as we continue the evolution of Shake Shack. We remain one of the fastest growing publicly traded restaurant companies and we're growing profitably while strengthening our brand and our opportunity ahead. I now hand it off to Katie to share more about the details of the quarter and expectations for the fourth quarter.
spk11: Great. Thank you. Good morning. We're pleased with the company's performance in the third quarter as we drove a material 400 basis points of margin expansion and grew adjusted EBITDA by more than 80% year over year to 13% of total revenue. That's a 430 basis point improvement versus last year's levels. While industry trends remain challenging, we built our 2023 priorities as a roadmap to deliver improvements in profitability and cash flow, even against a less certain consumer spending backdrop and ongoing inflationary pressures. Our momentum has picked up in October with 3.5% same-check sales and approximately flat traffic. a meaningful improvement since September, and we are strategically executing opportunities to drive profitable traffic growth across our shacks. On to our third quarter results. Total revenue was $276.2 million, up 21.2% year-over-year, driven by strong performance in new shack openings system-wide and positive same-shack sales. We grew system-wide sales by 24.3% year-over-year to a record high of $438.9 million. We ended the quarter with 495 SHACs system-wide, up 23.1% year-over-year, with approximately 40% of our system-wide sales in the quarter generated by our licensed business and about 60% from our company-operated SHACs. In license, we are executing ahead of plan and are pleased with the many strong recent SHAC openings as we entered new markets and deepened our presence in existing markets. In the third quarter, along with our license partners, we opened 15 new shacks, growing our total licensed shack count to 215. We grew sales by 30.1% year-over-year to $173.9 million. We've opened 39 shacks in our licensed business year-to-date, and we're targeting opening about 40 in fiscal 2023. On the company-operated side, we grew shack sales 20.7% year-over-year to $265 million, supported by 10 shack openings, including four drive-thrus, plus the continued strong performance of recent NSOs and 2.3% year-over-year growth in same-shack sales. Our sales cadence in the quarter resembled more of a normal return to pre-COVID seasonality than we've seen in recent years, with a stronger July than softening in August and September. Pre-COVID, September sales typically fell seasonally from August levels around back to school. In more recent years, traffic patterns between August and September have been more muted, But beyond seasonality that was more pronounced in our urban checks, we were also navigating a backdrop of consumer spending pressures on restaurants broadly on top of other macroeconomic factors. We've also faced some headwinds from weather through the quarter with a particularly rainy East Coast and the hurricane in Southern California, which we believe together represented a loss of approximately $500,000 in sales. We lapped some digital marketing promotions from last year and comped over the highly successful Hot Ones LTO at the end of the quarter. But importantly, we are encouraged by the momentum we saw in October. Despite transitioning from high single-digit to now low single-digit menu price, October same-shack sales grew 3.5% with approximately flat traffic and positive same-shack sales growth both in-shack and inter-digital business. Traffic also improved in all of our regions compared to September levels with the strongest improvement seen in our northeast and mid-Atlantic regions. October AWS of 74,000 grew 1.4% year-over-year. We continue to drive more guests back to InShack Dining, and we're also leaning into various strategies in marketing and operations to navigate these uncertain macro waters, with opportunities to pulse on value-added offers in our own and third-party digital channels. We're still focusing on our premium ingredients and delivering hospitality, as well as further optimizing our four-wall performance. We've seen strong returns from our free Friday promotion and our afternoon happy hour BOGO shakes, plus we've had opportunities to dive deeper in select markets with performance marketing strategies, all of which are driving traffic and sales into our own channels. We grew third quarter same-check sales for our in-check channel by approximately 9%, with benefits from high single-digit menu price, continued tailwinds from our kiosk retrofit program, and positive traffic growth. Mixed headwinds improved sequentially from the second quarter, aided by strong demand for our premium sandwich and spicy fry offerings. Kiosk sales now represent well over half of our in-shack sales and are up more than 140 basis points year over year. Kiosk is our highest margin channel, and we remain very pleased with the at least high single-digit check lift we're seeing with this order mode versus traditional cashier sales in the shack. We're also testing some new capabilities to continue to drive enhanced upsell in this channel, which is now our largest order mode across our company-operated store base. Net stronger in-shack trends helped offset some of the pressure from seasonality and lapping digital promotions, driving a positive 2.3% same-shack sales and negative 4.2% traffic. Shack-level operating profit was $54 million, or 20.4% of shack sales. That's 400 basis points better versus last year, despite continued inflationary pressures across our four-wall P&L, as we delivered the strongest flow-through our restaurants have seen in over two years. Food and paper costs were 77.2 million, or 29.1% of shack sales, down 180 basis points versus last year, and up 10 basis points versus the second quarter. Blended food and paper inflation rose mid-single digits year over year, led by beef up low double digits and continued inflationary pressures in buns, chicken, plus fry costs up more than 15% year over year. Paper and packaging costs decreased low single digits year over year, as we benefited from a lower degree of off-premise mix. Last quarter, we shared that our supply chain team was working on opportunities to help offset persistent inflationary pressures. From adding new vendors to improving freight, we have already identified and are executing against some of these strategies. Most of these cost savings will come later in the fourth quarter and into 2024, but we are deep in a body of work to identify additional areas for continued and meaningful improvements through 2024 and beyond. Labor and related expenses were 76.2 million, or 28.8% of SHAC sales, down 60 basis points versus last year, and up 10 basis points quarter over quarter. We continue to leverage our labor strategies that we outlined last quarter, including improved forecasting and labor scheduling and driving broader kiosk adoption. You might recall that we, as well as the broader industry, faced some very real staffing pressures in the second half of last year. We have a significantly improved staffing backdrop here today with the best hourly and manager retention that we've seen in years. But even with this more pronounced seasonality pressures in the quarter, and a marked improvement in staffing levels with just more people available for shifts, our new scheduling capabilities and management have allowed us to be more efficient with our labor usage. We are proud of the progress here, but it's also important to note that we have delivered this improvement despite the many headwinds that add to our overall labor costs, including the larger degree of team members needed to support our dining rooms with the return of in-check traffic, and our commitment to improving the guest experience, as well as the significant wage investments we've made in our team members. But importantly, we're not resting here. We expect to continue to show benefits from these improvements in labor strategies that set our team members, our managers, and our SHACs up for success in the coming years, with improvements on deployment, refinements to the order journey, and more scalable and consistent processes. As we scale, we have a greater diversity of formats, from larger drive-thrus to streamlined food courts, and a variation in menu and channel mix across our restaurants, on top of efficiencies like kiosk, it's the right time to refine and evolve our labor model, as well as the broader staffing and deployment standards. This work is rooted in in-time and motion studies and various variables that will help us to staff to best optimize the unique needs of each of our shacks. This will give our operators much improved tools, and we will update you as we test and roll this new staffing system out to the shacks this quarter and into 2024. We plan for this methodology to also enhance how we train and open our SHACs and reduce the overall drag on our P&L from new SHAC openings as we aim to reach optimal profitability at a much faster pace than today's performance. Other operating expenses were $37.3 million, or 14.1% of SHAC sales, down 120 basis points from the third quarter of 2022. Our strategy to reduce R&M expenditures has lowered this expense per store week by $300 year over year. We also benefited from lower delivery commission expenses per store week as more guests returned to in-shack dining. But we're anticipating that delivery sales will pick up in the fourth quarter in line with recent historical patterns. Occupancy and related expenses were 20.3 million or 7.7% of shack sales, down 20 basis points from last year's levels. All in, we are very pleased with the level of margin improvement we delivered in the quarter, and we continue to build back our profitability, which is vital for our long-term growth. G&A was $30.9 million. Excluding $200,000 in severance costs, G&A was $30.7 million, or 11.1% of total revenue, 70 basis points favorable to last year. We showed strong leverage on this line in the quarter, with G&A X severance expense up just 14.1% year-over-year, versus total revenue that grew 21.2% year-over-year and system-wide sales of 24.3% year-over-year. We continue to believe that we have a meaningful opportunity to make greater investments in our direct marketing spend to drive sustainable long-term traffic growth. As we continue to show progress in leveraging home office G&A investments, we'll look to open up additional funds to invest in strategies to drive traffic while also still delivering on our strategic priorities to invest with discipline and enhance our cash position. Pre-opening costs were $5 million in the quarter, up 63.4% year over year, as we opened 10 SHACs in the quarter versus only two in the third quarter of last year. We are seeing higher pre-opening expenses per SHAC due to an increase in labor expenses, other operating expenses, and occupancy. A majority of pre-opening occupancy expense is non-cash rent, and we're seeing higher costs here driven by extended opening timelines. We're also experiencing elevated labor and other operating expenses, most of which are impacted by development pipeline pushes around items including utilities and availability of critical equipment needed at the end of a project that can cause unanticipated delays in opening. We have plans in place around development, training, and operations to get tighter on execution here, as we target lowering our pre-opening expenses by at least 10% per SHAC in 2024 versus this year's levels, and further opportunity to lower these costs in the coming years. With a combination of strong four-wall performance and disciplined spending in G&A and other places, we grew adjusted EBITDA by more than 80% year-over-year to $35.8 million, or 13% of total revenue, up from 8.7% of total revenue last year. In the quarter, depreciation was $23.1 million, up 24% year-over-year as we continue to invest in new shacks in our business. We realized net income attributable to Shake Shack Inc. of $7.6 million, or $0.19 per diluted share. We reported an adjusted pro forma net income of $7.5 million, or $0.17 per fully exchanged and diluted share. Our adjusted pro forma tax rate, excluding the impact of equity-based compensation, was 12%. Finally, our balance sheet remains solid with $285 million in cash and cash equivalents and marketable securities at the end of the quarter, a decrease from $295.2 million in the prior quarter, representing a material improvement in our cash usage versus last year, despite having opened more than twice the number of SHACs by the end of the third quarter compared to last year. In fact, our third quarter CapEx declined 3% year-over-year to $38.3 million, with new shack CapEx representing the majority of the spend, followed by our IT spend. We invested more to maintain our shacks as our early generation fleet ages and completed the bulk of the expenses around the kiosk retrofit program. These investments were somewhat offset by a lower degree of CapEx investments in our digital business as we scale our current offerings and leverage in shack dining experiences. In the last few years, our CapEx has been elevated due to the higher cost for new shack builds. heavy investments to build our digital platforms as we went from effectively no digital sales pre-COVID to approximately 30% of our business currently. And we executed a number of special projects, including the rollout of our kiosk retrofit program. But we're committed to bringing the net cost to build of our 24 class down by about 10% next year as a starting point. And we're also finding efficiencies in other areas of CapEx spend, including IT. Now into guidance, which reflects a degree of uncertainty around the spending outlook and inflationary headwinds. This range does not reflect any unknown additional delays to our development schedule or any changes to the macro landscape beyond what we are experiencing today. For the fourth quarter, we guide total revenue of $276.25 million to $281.75 million, with $10.25 to $10.75 million of licensing revenue approximately 14 company-operated openings, approximately five licensed SHAC openings, and for same-SHAC sales to be up low single digits year-over-year with low single-digit menu price and relatively consistent mixed trends in the fourth quarter as we had in the third. Our guidance for the full quarter to achieve low single-digit same-SHAC sales assumes we return to more typical seasonality patterns in November and December. While we're not providing guidance beyond the fourth quarter, just a reminder that we will lap the popular white truffle burger LTO starting in February. This was our most expensive LTO ever and drove traffic, so lapping it will likely be a headwind to our traffic price and mix. We have a strong LTO lineup planned for next year. However, we're going to be keeping an eye on this tougher compare. We're guiding 4Q restaurant margins to be approximately 19%. Our guidance for the fourth quarter is a material improvement from historical seasonality and reflects the least amount of menu price we have carried since early 2021, despite ongoing inflationary pressures. Historically, our fourth quarter average weekly sales have been the lower end of seasonality, and shock-level operating profit margins have compressed by approximately 300 basis points versus the third quarter. Our fourth quarter guidance reflects food and paper inflation to be up mid-single digits year over year, driven by beef up mid-teens. We expect labor inflation to be in the low single-digit range year over year. Our full year 2023 guidance calls for total revenue of approximately $1.08 billion, growing about 20% year over year, same-check sales to grow by mid-single digits with high single-digit price, We expect licensing revenue to reach 40.5 to 41 million. Restaurant margins of 19.7 to 20%. That's 220 to 250 basis points improvement from last year's levels. We guide 2023 GNA of 125 to 128 million. This is absent the 3.5 million in non-recurring costs that are excluded from adjusted EBITDA year-to-date. At the midpoint, G&A would be 11.7% of total revenue. That's approximately 90 basis points of leverage versus 2022 levels. Other guidance points, we are lowering our equity-based compensation expectations to approximately $16 million, guiding pre-open to be $17 to $19 million, depreciation of $88 to $93 million, and adjusted pro forma tax, excluding the impact of equity-based compensation to be 16 to 18%. Altogether, based on our performance so far this year, we are raising our fiscal 2023 adjusted EBITDA to $125 to $130 million, representing approximately 70% to 80% growth year-over-year. Thank you, and I'll turn it back to Randy.
spk15: Thanks, Katie. I want to end today's call with a moment of celebration as well as sharing our focus heading into 2024. Last week, our team celebrated the opening of our 500th Shake Shack globally. On behalf of our entire team, past, present, and future, this milestone means so much to us. And the organization is incredibly excited for the possibilities that lay ahead. Now here's a quick snapshot of where the team is aligning our focus and strategic plan for 2024. First, our core focus will be on delivering a consistent guest experience. We know our guests love the shack. Our next phase of growth has to be more consistent. And we'll be working to improve throughput, speed, and consistency across all our Shacks, focusing on a back-to-basics operation strategy of excellence in every interaction. Second, we'll grow sales and strengthen our brand. As we've grown Shacks to 33 states and 18 countries, and with many more to come, our brand is incredibly strong. And in 2024, we'll focus on driving that brand even further and deeper around the globe. connecting with our fans in new ways that can drive traffic, sales, and brand awareness. Third, we'll continue our journey to making Shake Shack even more profitable. We remain committed to improving Shack margins in the next year, to expense discipline in all areas of the company, including G&A, and to ensuring profitable growth as we scale. We'll be honing in on near and long-term strategies to scale our supply chain, improve our labor and efficiency in Shacks, improve our throughput to maximize peak sale hours, and improve profitability across channels. We believe there are several opportunities to continue to grow long-term profitability. We're doubling down on those strategies to execute in 24 and beyond. Fourth, we'll optimize and improve how we build and open SHACs. While retaining the exceptional experience Shake Shack is known for, we're on our way towards new prototypes and standards throughout our future SHAC classes that'll lower costs over time and create an improved guest and team member experience while driving strong returns on capital. And finally, we will continue our lead focus on developing and rewarding high-performing teams. Our people lead everything we do, every burger, every interaction, and every feeling that Shake Shack creates, and we'll continue to invest in them. The team is looking forward to what's ahead, and we hope we see you soon for a hot chicken and a troll shake this holiday season. With that, operator, we'll go ahead and open up the call for questions.
spk04: Thank you. will now be conducted in a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your lines in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants in speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from Ryan Vaccaro with Raymond James. Please go ahead.
spk16: Thank you, and good morning. I have two questions just on the development side, kind of from two different angles. First, you talked about opportunities to improve operations, throughput, et cetera, that you'll be studying as you go through 2024. Could you add any further context just on where some of those opportunities might be? Perhaps you could comment on maybe how much variability there is in the system today, maybe the gap between the most efficient units, the least efficient units? Of course, for controlling for sales, maybe just start there if we could.
spk15: Yeah, thanks, Brian. Look, there's a lot we've always, you know, relatively still a small company, right? We're just around 300 company operated restaurants, not quite in the United States. And over that time, you end up with various eras of kitchen design and of overall restaurant design. Where we're headed is kind of two prong approach. We've got to look at the continued build of the shack of the future, bringing down that cost, and really aligning on the best longer-term kitchen design. Most of our opportunity will come through how we move food through our kitchen and the flow of expediting, how we make things is not going to change, right? We have standards of our premium ingredients and the way that we cook that we expect to continue, but we can do it faster. We can do it better. We can do it with a greater sense of urgency more often. And it takes for us some of the steps of Focus, number one, making it, making throughput and speed. This has not been things that has been our core focus in the past. And I think it's the thing that operations and our teams are really working on right now to say, hey, it's going to be about this in 2024. It's going to be about every second of the day watching this, making sure we're consistent and knowing that a Shake Shack guest can count on what they're going to get when they come. And we know there's variability. I don't think there's an easy way to answer to the second part of your question, which is, well, is it about sales? Is it about lower sales versus higher sales? I mean, anyone who's worked in restaurants their whole life can tell you the easiest thing in the world to do is run a busy restaurant. The hardest thing to do is run one that's sometimes busy and not busy other times. And so I don't think there's an immediate correlation other than we've got to have the right staffing models. Katie talked a lot about that, which we are continuing to get better at. and we've got some new systems that we're putting in place from a lot of learning and work through this year, making sure we've got aces in places, as we call it, and the team's doing the right thing at the right time. So I think there's just a ton of opportunity there. It's where we're going to focus, and we're just going to continue to look at everything we can to simplify where we can and move our guests through a consistent experience. And that is kind of what you heard very clearly today is – what we're focused on for next year.
spk16: All right, that's great. And thinking about the second lens, sort of the opportunity to lower development costs, you know, an expected 10% decline in 24 is a nice down payment, but I'm assuming there was only so much you could do given the lead times on pipelines, et cetera. I guess looking out a few years beyond that, is there any way to ballpark a reasonable expectation on where your net development costs could land three years from now? Is low twos reasonable, maybe sub two? Is there any way to dimensionalize that or too early at this point?
spk15: Well, I think what we're going to guide to is what we've said today, which is we think this year was the high watermark. We believe we can take that down by about 10%. There's a number of ways we're going to do that, right? It starts with format, choice, and design. We've got new prototypes for our drive-thru. We've learned so much with the 21 that are open and more, and we know we can take down those costs. We've designed that new prototype. We're going to begin to build it, but that takes time. As you said, the restaurants will open next year in 24. We're designed in 22, identified in 2021 in many cases, and you've got to catch up to that backlog. You can't just tomorrow change and put together a new prototype. There will be elements of cost savings that you're going to start to see in 24, which is what we're committed to with our 10% decline. As we look ahead, we're committed to continuing to take that down. What we've got to make sure, though, is that we continue to balance the formats, right? As we learn to build drive-thrus, those are more expensive. They will get less expensive for us as we build a better prototype, but we believe that that should be some part of our class as we move forward And we'll keep doing that opportunistically. As we build our core shacks, the kind of shacks that you know of for the majority of the things we've built over time, we believe we have an opportunity to bring those down. And that's what our class is in 24. And as we look ahead to 25 and getting a strong pipeline, we're committed to continuing that work. And look, what's unknown is continuing inflationary pressures. We're finally starting to see, I would say, a little bit of lightning on the contractor side of the pressures that you We're really hard to build restaurants. You follow all these companies. Everybody's still in the same thing. There are literally still today restaurants where you're struggling to get the final HVAC equipment or electrical panels and those things. I expect those pressures to lessen quite a bit in these coming years. And hopefully that'll help us towards these goals. So, yes, you hear our commitment loud and clear. We're not going to give a number past next year. And by the way, I want to call out too, we also talked about pre-opening costs. We know that's a number we're focused on that we can and will do better next year and believe there's opportunity beyond that as well.
spk04: Our next question comes from Sarah Senator with Bank of America. Please go ahead.
spk11: Hi, this is Catherine Griffin on for Sarah. Thanks for the question. I think first I just wanted to ask about some of the restaurant-level margin components in the third quarter, specifically on restaurant other operating expense. Looks like that was down year-over-year as a percent of sales. So I'm curious how much of that was leverage in restaurant sales versus delivery, which I think has higher margins. And then also just on food margins, a little bit better than expected, is that a function of sales mix or, you know, or commodities a little bit more favorable? Great. Hi. So on other aspects, we did have a lower, we did have a benefit from a lower delivery mix in the quarter. But we also had some, you know, pretty good savings on things like R&M and lower T&E expenses. which contributed to that outperformance in the quarter. We've been just doing a lot in line with our strategic plan with better managing that expense line in our restaurants from not only improving the profitability in our third-party delivery channels, but also through R&M strategies of replacing equipment that was aging and more expense discipline within our restaurants, just showing some nice performance on that side. On the food side, you know, we did have a benefit from higher menu price. I will say, though, that beef inflation did pick up, especially towards the end of the quarter. And that is one that we are watching here as we've guided for kind of mid-teens level of inflation into year end. Great. Thank you. And then, Katie, I actually was curious about some of your earlier comments just on scaling some of the digital investments that you've made. I was wondering if you could talk a little bit more just about, you know, the timeline, I guess, how long it's taken to achieve some of those, like, scale benefits from investments, and then how do you measure return on investment for some of that, for those digital initiatives? Yep. So on scaling digital, you know, bringing back a little bit of the history of our digital journey, you know, starting in, you know, 2019, if you go back to that level, We had a very low digital mix as a company. And with everything that happened with COVID, we accelerated a lot of investments on that side, drove a pretty healthy digital mix, which was really critical for the company during times when guests were not going to the dining rooms as much. But as we've seen more of that return to normal, return to InShack experience, that really aided by kiosks as well. It really has changed the pace of investment needed to support this business. So kind of going from nothing to, you know, the great platforms that we have today required a level of commitment. And now where we are today is on making sure that we are being very disciplined with how we're supporting that and also still investing for our growth. So if you look at kind of what we've done with Kiosk and the retrofit program on that side and how we're investing more there on on upsell capabilities and better software and a better experience for that guest. We're doing that in a way that is more cost efficient and will scale over time. I think it's important to note too that, you know, digital businesses require some level of upkeep. And that's just something that's going to, you know, as we are a digital leader in the space, you know, that's just something that's going to be part of our CapEx and we're we're working on strategies and executing on strategies to be more efficient on that side.
spk04: Our next question comes from Jim Sanderson with North Coast Research. Please go ahead.
spk01: Hey, congratulations on a great quarter. Just wanted to talk a little bit more about pricing. I think a lot of your competitors have taken their menu prices up to 3%, 4% this quarter. Just wondering how you're looking at pricing, if you have room to take that up further in the quarter or into 2024 as you start getting more visibility on inflation. Thank you.
spk15: Yeah, thanks, Jim. We've definitely been You know, we've been cautious for the history of the company. Obviously, we're rolling off a high single digit from last year. We wanted to be cautious. So we took about 1%, just a small price increase in October, end of October. And I think we're looking at it now to say, where do some of these inflationary pressures go? We continue to see increases in our FRIs. And beef, obviously, is the biggest part of the basket that we're looking at. And, you know, we'll continue to look at price as a lever that we may need to take. We feel good about the current value scores. But like anything, I mean, I think everyone, whether it's every restaurant, retail, you see a lot of cautiousness in the consumer. And we just want to be careful there. We want to make sure we're building this company not just for this next quarter, but for very long term. And we want to make sure we're looking at all of our channels and where pricing might go there. And I think we'll take another look at that probably in the first quarter, but we're not guiding yet at this time whether and how we will take anything. We're rolling kind of a low single digit right now for the next six months or so. And we'll keep an eye on that as we go. But we'll be looking at 2024 and taking price where we need to.
spk01: All right. And just a quick follow up question. You mentioned a movie promotion and the overlap in trade areas. Do you have a sense of how many Shake Shacks in the U.S. overlap with trade areas where that movie will be shown? Just a ballpark.
spk15: I don't have a number of that. We've got a lot that are actually in some of the core shacks that are in some of these great shopping lifestyle centers adjacent to movie theaters. We've seen there were various pops over the summer with Barbie and some of the other strong movies that happened and drove some sales. We do see a correlation in some of our shacks. I'm sorry I don't have the number, but I'm going to just roughly guess it's probably around 10% or so that are pretty close to having some kind of impact there.
spk11: Yep. And we're going to be doing a lot of cool activations that, you know, close to, I'm not going to give an exact number on this side, but there's, you know, about over 50 shacks. They're going to have some really unique, exciting activations that are troll specific. Vinyl takeovers. Lots of exciting things going on around the Shack. We've strategically picked some of these just due to their proximity to movie theaters. And there's even going to be, you know, as Randy alluded to in the script, there's even going to be a few of them that are getting kind of this extra plus up with glitter bars for kids, coloring stations, photo booths. It's going to be a really fun way to engage with our guests around this exciting movie.
spk04: Our next question comes from Jeff Farmer with Gordon Haskett. Please go ahead.
spk13: Thank you. So for the 21 drive-through operation or drive-throughs you have in operation, I realize a handful of those have only been in operation a few months here. But can you touch on the common themes of those drive-throughs that have outperformed or underperformed expectations in the early going?
spk15: Yeah, you bet. Thank you. And we've said, look, we've shared some of these targets I would say on the outperform, like anything, like any shack, it's always going to be about the location, right? There are some shacks where we got it better than we did at others. Certain shacks where we would say, you know what? We probably could have put a shack there. We probably could have gone to a higher traffic location or a better way to get in and out of that location. So I think our best ones are the ones where we're seeing the best high traffic zones aligned with high brand awareness areas where Shake Shack kind of has strength. And I would say we've still got a lot to learn in our operation. We are kind of scaling that whole operation down slightly, not just for cost to build, because what we've learned is how many seats we really need, how many seats we need outside, what the vibe should be. And we think we can continue to build a drive-thru that's really distinct and exciting in the industry. but take down the size and cost of it in the kind of 2025 models. If you look at this coming year, what we're excited about for the next batch of drive-thrus, we're going to start to do it in what has traditionally been some of our stronger, more coastal markets. There'll be some shack drive-thrus open on the East Coast, New Jersey, Long Island, looking at some on the West Coast in California. So we feel really good about uh the opportunities there to keep learning and uh we're gonna we're we're investing in this and we like it and it should be a part of our future growth but we still got a lot to learn and improve upon uh that's helpful just one follow-up on the october comp which was uh 3.5 percent you guys touched on that you were rolling off some pricing uh at some point in october but um
spk13: not entirely clear to me when. So the October comp was 3.5%. What level of pricing was captured in that 3.5% comp?
spk11: Yeah, we had, I would say, blended to kind of a mid-single-digit range. We rolled off of that high single-digit in the middle of the quarter. We're going to be exiting December at about 3.5% price, so as to think about that.
spk15: And the October comp was roughly flat on traffic, which was an improvement as we had seen some of those negative traffic periods toward the end of the third quarter, as we said. So I think that was the encouraging thing, driving some good sales in October and looking ahead.
spk03: Our next question comes from Brian Harper with Martin Stanley.
spk04: Please go ahead.
spk08: Yeah, thank you. Good morning. Can I just ask about the kind of the comments you made on staffing model, what we should observe there and what you think kind of the timeline for rolling that out is?
spk11: Yeah, so I would say we're early days here on this. I think it's a natural evolution of just the company as we have layered in some added efficiencies here with kiosks. We have new formats here, like much larger drive-thrus. We also have, you know, smaller formats like food courts, and then we have our traditional kind of core expression. There's just more differentiated factors that we want to take into account with how we're thinking about staffing. Not only just to get more precise on hours used for, you know, a number of, you know, variables, including menu mix, channel mix, and format, but also to make sure that we are maximizing peaks as well. So I would say it's still early days. We're looking to roll out some tests by the end of this year into next year. We're going to keep you updated on how that goes, but nothing really more to share on this front today.
spk08: Okay, thanks. Just a smaller question, maybe. Randy, you made some comments just about... Asia, maybe some uncertainty there, how that affects the licensed businesses. Are you referring to just sales at those units? Are you referring to how you think about the mix of openings as you go into next year? What were you suggesting there?
spk15: Both of those. I think you've got to obviously lead with China. We've got a significant part of our business there. It goes without saying there's macroeconomic uncertainty in the region there. And that'll, you know, that'll decide ultimate pace of our openings as well as what our, where our shacks align to for sales. So that's really the region you're looking at. Obviously that, what happens in China also spills out into our other Asian businesses through Korea, Japan, through various travel and economic indications. So that'll be something, I think that's probably the biggest uncertainty as we look at our licensed business. Obviously the Middle East has some, fair amount of uncertainty as well right now and will. But that's what my comments were really looking at. I think it's a little bit of an unknown as to how that part of our business will grow in this next coming year.
spk04: Our next question comes from Sharon with William Blair. Please go ahead.
spk10: Hi, good morning. I guess labor has been tough right across the entire space. I think you're kind of within 150 bips of where you were pre-pandemic, which is great, just considering all the inflation that you've had to digest there. With kiosks and it sounds like much better tenure at the employee level and now a new staffing system that'll be going into place, do you think kind of achieving pre-pandemic labor is a bogey that you can shoot for or... Is this just all kind of trying to battle what might be ongoing labor inflation going forward?
spk15: Well, I think it's hard to say, Sharon. We're not going to guide specifically to any new labor percentage. We've got a lot that we are really looking at there in terms of just being more effective and efficient with how we scale. The good tailwinds happening, we've mentioned, as retention and turnover has improved. But you can't deny the continued increase in labor costs. That's not going down. We will have $20 an hour in California in April. That's a significant part of our business. And we will have, I expect, continued wage increases over time. And that's not going to settle anytime soon. And that'll be part of our pricing structure and how much we choose to offset with that. But again, our commitment here is to being as efficient as we possibly can. But we've also got to pay a great rate to sustain. If you look at our profitability improvements, A lot of it has had to do with our ability to keep, retain, and find great people. As that happens better, like any company, and certainly like us, we'll get better at that. So, look, we're committed to trying to improve it, but we're not going to give guidance to specifically PATH today.
spk10: And Randy, I know you said that tenure was up for, I think, frontline and management staff at the unit level. Can you kind of give any comparisons of kind of like what average tenure is now at the manager level or hourly level relative to 2019?
spk15: You know, we have never broken that out, Sharon. I'd say this, as we look at the industry just kind of traditionally, look, we work in a high turnover section of the industry, right? The industry general and our section of the industry generally has quite high turnover. I'd say we probably track similarly in our hourly team members turnover and retention across the industry. But from also what we've seen, we track much better on our management at all levels. And our managers tend to grow with us, stay with us, and continue to earn. Our GMs, we've said this before, can generally all in make over six figures, right? Many make a lot more than that. We give stock to every GM every year. this is a significant part of our ability to retain people. So now as we're growing as fast as we are, we got to keep developing that, right? And we got to balance growth. And we do invest, we've talked a lot about this in previous calls, so much time and effort, our people team into developing people at all levels. And the other part of that we got to do and continue to do better, you heard a lot of that in today's call, is how can we keep simplifying our operations so our leaders have an easier time coming up the ladder? And that's the stuff we look. I think that's our sweet spot of the company. It'll never be easy, and we're going to keep investing there, but we're real proud of how the teams continue to build.
spk04: Our next question comes from Jake Bartlett with Tourist Securities. Please go ahead.
spk02: Great. Thanks for taking the question. You know, mine was about the opportunity to expand margins going forward, and I know you've You talked about a few things you're looking into and you're executing on with labor scheduling, supply chain. Randy, you mentioned margins being up in 24. I wasn't sure if that was just a comment on restaurant margins specifically, but I'm wondering whether you can help us dimensionalize any of these initiatives, what the scale of the potential improvement is, any metrics that you you know, that you found that you think you can improve upon and any way to quantify the opportunity in the line items?
spk15: Yeah, look, we're not giving guidance for 24 yet, Jake, other than to say you've heard our commitment loud and clear through this whole year and today and saying we continue to identify opportunities starting with supply chain. We're really talking about it as kind of a total cost to serve and how can we start with the product, look at our supply chain opportunities. We're digging deep on that. and then look at how that flows through the restaurant in every way and see where our opportunities are. So we believe we can continue to expand margins at the restaurant level and overall in the company. And if you just take a beat for a second, I think it's really important to do that. We increased our EBITDA margin by over 400 basis points overall in the company. We expect some level of leverage at G&A this year. We continue to expect that that will be part of our plans moving forward. So I think just a core focus on profitability and lots of different ways we're working to get there. We'll keep you posted as we get into 24 as to what that is going to look like. Again, that's balanced against a lot of the uncertainty of the consumer, but we've built a lot of this infrastructure now to be going after and identifying where these opportunities lay and start to go after them one by one.
spk11: I want to be clear here. The teams are moving together. We're moving together very purposefully here at a lot of these opportunities which we've identified through supply chain, through labor, through various other areas within our P&L to continue to drive efficiencies and help us outperform what has been a challenging backdrop for the industry with consumer spending pressures and continued inflationary pressures. you know, really encouraged and excited about what's going on today, what we've built on and what the plans are for the go forward to help continue to improve our performance financially.
spk02: Great. Thanks. And a comment or just a question on, you know, the fourth quarter guidance for companies in source sales and the progress so far in October. I think last year you're year-over-year compares get a little easier for the next couple months. You did mention, and then you also have the kind of the movie tie-in. You mentioned a return to seasonality, and I'm wondering, you know, in October and December, whether there was some abnormal seasonal behavior last year. So I just want to make sure I know the puts and takes in terms of, you know, how we should think of October and December this year. Sure. November and December.
spk11: Yeah, so just a reminder, our compares over the past couple of years with just a different pricing cadence than we've had pre-COVID are a little bit choppier. So last year we had taken kind of, we said between 7% to 9% in menu price across the system, which we rolled off of. So the sequential compares on AWS and on that side, we're expecting that to return to kind of a more normal pre-COVID seasonality pattern. Um, we did have, um, some impact, you know, at the end of last year on our AWS from a very large number of NSOs in December. Um, and as you know, following our company, you know, our restaurants tend to open very strong and settle over time. We're going to be comparing over that, um, in December of this year. Um, and then just, you know, another note on that side, um, you know, we have a pretty solid lineup on the culinary side. but just still lapping over hot ones as well.
spk04: Our next question comes from Michael Tames with Oppenheimer. Please go ahead.
spk14: Hi, thanks. Good morning. You know, you talked about kiosks being over 50% of in-check sales now. Can you talk about any cohort of units that's above the 50% level? Is there anything different about those units versus the rest of the store base? And Is that informing you about the potential upside that still exists for kiosks? And anything else you can talk about, maybe margin differentials or anything? Thanks.
spk11: So, yeah, we have a large difference in kiosk penetration for NSHAC. It's something that we've been very focused on driving a narrowing of the gap and driving more guests to the kiosk. And there's still a lot of exciting opportunity on that front. And it's great that we have kind of the most of the entire fleet now rolled out. It is definitely our highest margin channel. We see a nice checklist on the back of it, and we still think we're early days here in really kind of leveraging the full potential of upsell through this digital order mode and how that we can start to leverage guest data over the long term through that channel. What I will say is that there's a number of variables which can impact the degree of kiosk usage, which you know, we're investigating and, you know, continuing to refine. Some of it's just, you know, simple wayfinding and how the guest enters the back, you know, is that kiosk in the best optimal place? And, you know, these are easy fixes that we'll go after over the coming quarters where we can. But, you know, continuing to train and arm our teams and our managers with, you know, why this is such an important initiative and guiding our guests to that kiosk is, working, and we're excited for what that potential will be over the longer term.
spk14: Thanks. And then, you know, you talked about supply chain today and trying to use that to help drive better margins going forward. So is that a reference to sort of looking at, you know, longer-term contracts, or can you just elaborate on how supply chain can be better utilized going forward?
spk15: Yeah. I mean, you've got to start with our actual scale. As I noted earlier, I mean, less than 300 companies operate shacks. Like, We have so much opportunity just in economies of scale. It starts also with development and how we choose to cluster our shacks more closely together. We've got a very spread out class of restaurants over this last decade, and we can begin to see opportunities in shipping and how we move freight, all of those things. But separately from that, we're going to start to look at just backing up supply, making sure we have other suppliers more aggressive going after some of the cost opportunities we're going to have. We're digging through all of that while retaining all the premium and improving all the premium way in which we bring our food in and the quality of ingredients. So I just think, look, this has always been a process. It's something we're spending a lot more time and effort on today. And I think in the coming years, we'll continue to identify opportunities where we can save on the supply chain.
spk04: Our next question comes from Andrew Charles with TD Collin. Please go ahead.
spk03: Sorry, we can't hear the question. Are you still there?
spk04: Mr. Charles, it's your turn now. Your line is open.
spk15: move on to the next question. We'll keep that going. Thanks.
spk04: Our next question comes from David Tarantino. Please go ahead.
spk07: Hi, good morning. My question is about the October sales trends. And I specifically wanted to ask about the marketing and promotions that you called out. Can you just maybe explain what you did in October that maybe you haven't done before or what drove the improvement in traffic and whether that's a new strategy you think you can employ as you think about the go forward? Thanks.
spk15: Yeah, thanks, David. Some of the things are new. Some are just kind of the shifting of things we've done before at various times in the year and employing some of those tactics. So lots of different marketing on all channels as we tee up Of course, LTOs pushing that. We noted that was a little bit of a pressure of a lap, but it always begins with that. Stories we can tell. A few other things we've been leaning into. Additional performance marketing. We're finding good success and strong returns on our ad spend in various performance channels. We're doing various regional marketing in areas where we think we can go deeper and really hit a city a little bit harder, more directed in lots of performance digital ways. Those tactics we continue to spend on and open up some ad spend as we prove that those have good returns. And we've done that. Various things on different types of offers that feel good for Shake Shack. For instance, we did free Fridays in our app channels, right? So that drove some strong uptick on Fridays where you could get a free fry when you order on our channels. We have an afternoon BOGO shake. And then we're doing various things with our delivery service providers as well, where we see potential impact. So when you really look at it, it's a balanced marketing approach towards the things that we believe work for us. We'll keep doing some of that as we go. And it's still a lot of test and learn. Traditionally, we have not been a company that spent a lot of money on true advertising. And it's time for us to ramp those up. We see that money being well-received and strong returns on that. And we expect we'll continue to do that in this quarter. as well as we plan in the next year. Doing it with discipline, but opening up as we scale as a company, there'll be greater opportunity for us to spend better on marketing.
spk03: Great. Thank you. Our next question comes from Brian Nolan with Piper Sandler.
spk04: Please go ahead.
spk12: Hey, thank you. Just a question. If there's a search for a chief operating officer, is there a search going on? And maybe what are the key characteristics or factors the executive team of the board is using or looking for in terms of finding the right candidate for Shake Shack?
spk15: Thank you. That's a great question. And let me just start by saying our current operational leadership team is deep, tenured, and strong and doing a heck of a job continuing to run things in the absence of a direct COO. at the moment. And I've obviously involved myself quite a bit more and a lot of our executive team jumping in and really supporting operations. So they are doing a great job. We're looking for the next great COO, and we have an incredible bench of candidates that we've been vetting, talking to, and considering. And we're going to take our time on this search. This is a critical position for the company. We expect to hire someone with deep operational expertise and who will help us continue the strategic plan that we've shared today. So we'll look forward to it. I expect it will take some time, and we'll keep you posted as that gets closer to being finalized.
spk03: Thank you. Our next question comes from Anisha Dutt with Jeffrey Bernstein.
spk04: Please go ahead.
spk00: Hi. Sorry. That's for Jeffrey Bernstein at Barclays. This is Anisha on for him. Thanks for the initial unit growth guidance. Conceptually, how do you think about balancing sales and returns in a challenging macro, and is there any change in your desire over time to focus on big cities and major metros, presumably suburbs, and drive-throughs being more relevant?
spk15: Yeah, all of the above. I mean, if you look at the last couple years, that's exactly what we've done. We do certainly believe in urban centers, and we'll continue to grow shacks there as we have, but the majority of our growth is coming outside of traditional urban centers. suburbs and some level of drive-throughs. And we'll keep you posted on that. But we think 40 is a great number of company operating next year. I think that really balances us out. Similar to this year, keeps a strong class moving forward. We opened almost 80 restaurants this year, totally worldwide. That's a pretty strong unit growth. And we expect to be similar in that mid-teens unit growth next year. And we think that's right. As we also spend time to continue to refine the cost to build our profitability and this uncertain sales environment as we head into the next year. We think that's a really good number to appropriately focus the company on, continue to be a growth company while getting more and more profitable.
spk03: Great. Thank you. Our next question comes from Brian Vaccaro with Raymond James.
spk16: Please go ahead. Hi, thanks. Just a quick follow-up. Katie, on the 4Q revenue guidance, could you be a little more specific just on what you layered in from a seasonality perspective? I'm just curious what you consider, you know, quote-unquote normal seasonality, and also what you layered in as it relates to your NSO sales performance. I think that's outperformed your expectations this year, but correct me if I'm wrong there. Any help on those two would be great. Thank you.
spk11: Yeah, sure. So, October, better than historical seasonality. Inner guidance is kind of a return to more normal seasonality, kind of with where we would have been in October, kind of without that big boost at the low end, and then carrying through some of the recent momentum towards the high end, but assuming normal seasonality. There's some puts and takes there on the non-comp side that I think are important to just reiterate. So first of all, on development, we're going to have, you know, we're expecting to have a little bit more of a back-end weighted opening schedule in the fourth quarter. So that will skew some of the contribution from new check openings in the quarter versus, you know, if you were to assume kind of a midpoint opening. And then the second point is, you know, we had 22 NSOs in the fourth quarter of last year, and they opened up very strong. And those sales have settled to good levels, but that will continue to also be something to think about as you're modeling for the fourth quarter.
spk04: There are no further questions at this time. I would like to turn the floor back over to management for closing comments.
spk15: Thanks, everybody. Really appreciate you taking the time, especially on this busy week. I know everybody's got a lot going on. So thanks so much, and we look forward to seeing you in the shack soon. Take care.
spk04: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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