Shake Shack, Inc.

Greetings. Welcome to Shake Shack's fourth quarter 2025 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 this conference is being recorded. I will now turn the conference over to Allison Sternberg, head of investor relations. Thank you. You may begin.

Thank you, Operator, and good morning, everyone. Joining me for Shake Shack's conference call is our CEO, Rob Lynch, and our Vice President of FP&A, Kerry Britton. 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 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 21, 2025, and our other SEC filings. 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 2025 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. I will now turn the call over to Rob.

Thank you, Allison, and good morning, everyone. Before I begin discussing our 2025 results and our 2026 plans, I want to share why, after almost two years in this role, I am so excited to be a part of this company. Firstly, I am thankful for the team that we have in place. My gratitude starts with all of the amazing people in our restaurants who welcome our guests every day with warm hospitality and amazing cooking that makes Shake Shack so special. I'm also grateful and excited for the executive team that we have built. We have so many talented people on our team, some who have been here from the beginning, who help our company stay focused on our North Star of enlightened hospitality. We've also added some remarkable new members to the team who bring a lot of external experience and best practices to bear on the foundation that we are building to support our lofty future aspirations. This is a balanced, experienced, and very capable group of executives driving our company forward. I'm also energized by the roster of candidates that we have built for our CFO search, and I'm confident that our process for that search will be completed in the first half of 2026. Another reason I am so excited and thankful to be here is because at Shake Shack, we truly believe that we have the best food in the industry, and we endeavor to give access to that food to an ever-growing number of communities throughout the world. In order to do that, we will need to continue to use the best ingredients in our freshly prepared food and conveniently deliver it with value to our guests in every community that we serve. Our company started as a hot dog stand in a park, a park that had fallen into disrepair and needed its community to bring it back to life. So what did our founders do? They raised money for that park by selling premium hot dogs made in one of the world's most acclaimed fine dining restaurants. to everyone who is willing to stand in line to order. And they served everyone with the same principles of enlightened hospitality that they were known for delivering in their fine dining restaurants. We aspire to bring that founder story to life every day and through each new shack that we build. We want to provide the entire world access to the quality of food and hospitality that historically has only been found in higher priced fine dining establishments. In doing so, we will prove that the world's best food doesn't have to be exclusive. In fact, it can be a delicious beacon of hope that brings us all together. But in order to accomplish this goal, we have to continue to use the highest quality ingredients, turn those ingredients into our culinary forward recipes, prepare our sandwiches, shakes, and sides fresh when ordered, and then deliver our food in a convenient and timely manner, all at a great value. Certainly not a small task, but we are well on our way to proving that food that is prepared fast with approachable price points doesn't have to mean that you are settling for anything less than the best in the world. I believe this endeavor is something to truly be proud of. It's why I'm here. Now on to our 2025 results. 2025 was a year of strong execution and disciplined growth. Despite a macroeconomic environment that remained uncertain for much of the year, our team delivered solid financial results, expanded our footprint with the largest class to date, and made important strides in improving our unit economics and guest value proposition. These outcomes reflect the hard work of our restaurant teams and the effectiveness of our strategic initiatives. I can't emphasize enough that we are laser focused on becoming a best-in-class restaurant operations company. What does that mean to us? It means that we will support our team members so that they can accurately and expediently serve our guests the highest quality, best tasting food in the industry at a great value with enlightened hospitality. Our teams have made so much progress in 2025, and I can't wait to celebrate all of their upcoming achievements in 2026. For the year, we grew total revenue by more than 15%. increased our presence domestically and internationally by opening 85 shacks system-wide, and delivered same-shack sales growth of 2.3% in our company-operated business, all while we expanded our restaurant-level profit margin by 120 basis points to 22.6% and drove 20% year-over-year growth in adjusted EBITDA, reaching approximately $210 million. Our success this past year reflects an investment in and disciplined execution of a focused set of strategic priorities. We strengthened the fundamentals of the business while continuing to elevate the team member and guest experience, driving improvements in operational excellence, laying the foundation for greater quality and cost discipline within our supply chain, and delivering compelling culinary innovation and value. At the same time, we enhanced unit economics through margin expansion, and meaningful reductions in build costs, positioning the business for more durable and profitable growth. As stated earlier, operational excellence remains foundational to our strategy. In 2025, we completed the first full year under our new labor model, which is designed to place the right team members in the right roles at the right times to drive both efficiency and more importantly, hospitality. It is not about cutting labor. It is about the optimized deployment of our talent so that we can maximize the effectiveness of it. We want to make sure that our team members are well prepared to take care of our guests during our busiest times and that they are able to do that in a well-orchestrated, results-oriented manner. We've implemented a performance scorecard across our company-operated shafts. providing visibility and accountability by measuring key metrics across people, performance, and profits. As a result of this, we've seen attainment to the labor guide improve from approximately 50% of SHACs meeting targets in mid-2024 to consistently above 90% in 2025. This isn't about driving out costs. Cost reduction is an outcome, not the overarching goal. Our priority is to help our managers become more strategic and less reactionary to their ever-evolving scheduling needs. It's like any other thing that we do in life. When you align on a plan, measure results, and continue to optimize in a disciplined and consistent manner, it reduces stress that results from unforeseen circumstances and ultimately improves performance. In turn, you're able to better deal with the unexpected challenges that inevitably come your way. We are highly focused on execution through optimizing deployment, improving throughput, and ensuring our teams can deliver great service. We are seeing meaningful success from these efforts, evidenced by reduced wait times across all day parts and higher team member retention. Specifically, our wait times improved from approximately seven minutes in 2023 to under six minutes in 2025, and team member tenure has increased nearly 40% since 2023. Those results would not be achievable if we were simply cutting labor and increasing stress on our teams. Like many in the industry, we faced a challenging commodity environment in 2025, with beef inflation reaching the mid-teens in the second half of the year. Supply chain optimization was a critical focus as we navigated these pressures, and we approached it with a long-term mindset. Not by reducing portion sizes or negatively impacting quality, but by building a significantly improved supply chain. To mitigate rising costs and protect margins, we accelerated supply chain initiatives focused on diversification and logistics. We conducted the most comprehensive RFPs in our history across key categories and onboarded additional suppliers to foster competition, reduce business risk, and of course, to augment quality. At the same time, we have made significant improvements in our freight and distribution network, reducing the time and distance required to transport goods as our footprint expands. These structural improvements enhanced our resilience, improved purchasing leverage, and helped mitigate inflationary pressure without taking outsized price increases. Importantly, the groundwork we laid in 2025 positions us to achieve additional cost savings and further expansion in 2026 and beyond. Our progress in operational excellence has unlocked a new level of confidence and capability within our culinary organization, allowing us to introduce more elevated menu items and to be highly responsive to evolving consumer preferences and trends. In 2025, we formalized and strengthened our culinary development process, by implementing a disciplined stage gate framework to ensure every item meets three critical criteria. It must deliver our gold standard of culinary innovation and quality, resonate with our guests, and be operationally friendly in our shacks and our supply chain. We have a 12 to 18 month innovation calendar in place, giving us greater visibility and time to optimize our go-to-market planning and training. which leads to operational excellence and consistency at launch. This enhanced approach delivered tangible results in 2025. We launched one of our most successful LTO shakes, the Dubai Chocolate Shake, which drove meaningful traffic to our shacks and generated exceptionally strong guest satisfaction scores. We also leaned into side innovation, introducing items like fried pickles and onion rings, both of which performed strongly. In fact, onion rings resonated so much with our guests that we added them to our core menu, a testament to our ability to test, learn, and scale effectively. But our improvements are not limited to our LTOs. We also improved the quality of our core items as we made meaningful investments in improving the quality of our core sandwiches, fries, and beverages. These wins are not short-term in nature. They represent the foundation that we are building for the future. as we continue to innovate thoughtfully and deliver the highest quality food and hospitality in the industry. In January, we reintroduced our Korean-inspired menu, building on its previous success while elevating it with the addition of sauce chicken bites that have been very well received by our guests. We believe we have a lot of opportunity to increase our chicken sales, and innovation like sauce chicken bites will help us build new chicken occasions. We also expanded our Crackable Shake program with the True Love Shake, which added another exciting limited time option to delight our fans. We are extremely excited with the sales of this premium Crackable Shake platform and will continue to drive innovation there. Lastly, we introduced our Good Fit Menu, featuring a new way to enjoy Shake Shack and start the new year on a healthy note. The good fit menu items meet the current market demand for differing dietary preferences, including high protein serving sizes. We have always made these items. We simply package them up and merchandise them as a timely, relevant, additional sales layer for our business. A great example of our ability to drive sales growth without significant operational or supply chain disruption. In late January, we launched our We Really Cook campaign. This campaign spotlights our recipes and the quality ingredients that go into preparing the cook-to-order food we deliver each and every day. In each shack, every day, our skilled team members chop, prep, grill, season, and build meals we're proud to share with our guests. This marketing platform is an investment in creating awareness amongst current and prospective guests. about what really makes Shake Shack special. We want to reinforce the fact that we freshly prepare fine dining quality recipes in our shacks every day and deliver them with enlightened hospitality. Over time, this awareness will continue to build our value proposition and make us even more competitive across the restaurant industry. We will also continue to strengthen our value offering through compelling price points within our digital channels. Our 135 in-app promotion platform has proven to be a powerful guest acquisition and engagement tool, driving app downloads up approximately 50% since launch. Importantly, this platform allows us to deliver targeted value while maintaining pricing integrity across the broader menu. The combination of elevated innovation and strategic channel-driven value resulted in strong traffic trends, improved brand engagement, and a more balanced positioning between premium quality and everyday accessibility. The new guests that we are bringing into our app are also the foundation for the launch of our loyalty platform later this year. On the development front, 2025 was a milestone year for Shake Shack as we expanded our global footprint while materially improving the economics of how we build and scale the brand. We opened 45 new company-operated shacks during the year. We successfully entered new domestic markets like Buffalo and Oklahoma City. The viability of these markets for our brand may have been questioned in the past, but we are proving that Shake Shack has the potential to enter every market in the United States. In 2025, we made significant progress in optimizing our build model. Through disciplined design simplification, value engineering, and procurement strategies, we reduced the average net build cost for new shacks to under $2 million in 2025, a reduction of approximately 20% compared to the prior year. By improving build costs, maintaining AUVs, and expanding margins, we are generating stronger returns and creating more efficient, profitable growth as we scale. Looking ahead, our pipeline for 2026 is even more robust. with plans to open 55 to 60 new company-operated shacks, primarily in markets outside of our historical footprint of the Northeast and in major tourist cities. Our licensed business also delivered strong momentum, with 40 new licensed openings in 2025. We saw particularly strong performance in our new shacks and markets that we have entered in the past two years, such as Canada and Israel. We are also proud of our strong comp performance in the Middle East, Japan, the United Kingdom, and in US airports. We announced several strategic growth partnerships, including expansion into Hawaii, a new partnership with Penn Entertainment to bring Shake Shack to casino destinations, expansion into Vietnam, and a new agreement to enter Panama. Most recently, in January, we partnered with the Australian Open to launch two pop-up shacks at the tennis tournament. Together, these two licensed sites did approximately $1.6 million in sales in just three weeks over the course of the tournament. Attendees there were willing to stand in a very long line to get a shack burger and fries, indicating strong demand for our brand in this market, despite having never been there before. These partnerships expand our global reach reinforce Shake Shack as a premium internationally recognized brand, and give us extreme confidence in our ongoing global growth potential. As we close out 2025, we're proud of the progress that we've made, from delivering strong financial performance and improving unit economics, to accelerating development, strengthening our operations, and continuing to innovate in our culinary offerings. The year was truly transformative. laying a foundation that positions Shake Shack for sustainable, profitable growth. We are entering 2026 with confidence, guided by a clear strategy and disciplined focus on creating long-term value for our guests, team members, and shareholders. Looking ahead, we are executing against a strategy centered on profitable revenue growth, margin expansion, and strategic investments in our brand and infrastructure. We hope to achieve this by focusing on six key priorities. Those priorities are building a culture of leaders, optimizing restaurant and supply chain operations, driving comp sales through culinary marketing and digital innovation, building and operating our shacks with best-in-class returns, accelerating our licensed business, and investing in long-term strategic capabilities. By staying disciplined in these areas, We are confident that we will continue to drive strong operating results, enhanced guest experiences, and sustainable growth as Shake Shack scales both domestically and internationally. The investments we're making in the business in 2025 and into 2026 will position us to start leveraging the capital spent and our P&L in 2027 and beyond. As a result, We expect that by 2027, we will be growing G&A at a lower rate than sales. We plan to disclose our G&A long-range plan that will deliver this leverage in the back half of 2026 after our new CFO joins the team. Finally, I would like to give some color on our strong start to the year. January same-shack sales grew 4.3% year over year. Despite meaningful weather headwinds in January, we've nevertheless generated solid sales growth fueled by continued traction in our in-app value platform, increased hours of operations in our shacks, and the launch of compelling culinary innovation. Our start to the year, coupled with the leadership team that we now have in place, gives me unwavering confidence that our plan is working. We continue to believe that we can deliver on our goals for 2026 and for years to come. I will now hand the call over to Carrie Britton, who has been an invaluable leader and partner through our CFO transition, to discuss our quarterly results and guidance. Carrie?