Shake Shack, Inc.

Greetings. Welcome to Shake Shack's first quarter 2026 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. 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 26, 2026, 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 first quarter 2026 shareholder letter, which can be found at investor.shakeshack.com in the quarterly results section and as an exhibit to our 8K for the quarter. I will now turn the call over to Rob.

Thanks, Allison, and good morning, everyone. I want to start by thanking our incredible team members across the globe who continue to bring enlightened hospitality to life every single day. Your dedication to serving our guests with care and kindness is what makes Shake Shack special, and I'm grateful for everything that you do. Turning to our results, I'm pleased to report that our first quarter performance showcases continued sales momentum in our company-operated shacks and meaningful progress against our six strategic priorities for 2026, which are building a culture of leaders, optimizing restaurant and supply chain operations, driving comp sales behind 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. For the first quarter, we grew total revenue by more than 14%. Much of this growth came from same-shack sales growth of 4.6%, including a 1.4% traffic growth. These strong sales and continued traffic growth were achieved despite significant weather impacts that contributed 240 basis points of negative comp in the quarter, negatively impacting our EBITDA for the quarter. Despite these headwinds, our sales and traffic momentum continued, and we have now delivered three straight quarters of traffic growth. At the core of our sales performance is first and foremost strong restaurant operations that deliver guest satisfaction. Secondly, it's culinary innovation that differentiates our brand. And lastly, are our investments in targeted digital media to create awareness of our guest value proposition. In Q1, we increased investments in delivering guest satisfaction, driving comp, and opening new shacks. And despite elevated beef costs that continue to persist, we were able to expand our restaurant-level profit margin by 50 basis points year over year to 21.2%. We continue to show our ability to grow both top line sales and operating margin, primarily through ongoing traffic driving programs and operational and supply chain productivity. We also delivered our largest first quarter of new units ever with 17 new SHACs. We continue to successfully bring Shake Shack to new and under penetrated markets, many outside of our historical footprint. Given our strong current cash on cash returns, and expected future returns, we will continue to accelerate our company-operated development efforts. Consistent with this strategy, we are now guiding to 60 to 65 new company-operated SHACs for 2026, an increase from our prior guidance of 55 to 60 SHACs. I would call out that opening this higher number of new SHACs in Q1 did increase our total pre-opening costs, which weighed on our adjusted EBITDA for the quarter. Throughout the quarter, we made strategic investments to support our sales driving initiatives and new unit openings, both of which support our multi-year growth plans. These investments allow us to bring Shake Shack to more communities and create awareness of what makes our food and hospitality so special. These investments continue to enhance our strong value proposition and drive traffic in this value-oriented environment. As we work to continue to enhance our value equation, in a very competitive marketplace, we're focused on making the right investments in our food, our assets, our team members, and our traffic driving strategies. As a result of the weather headwinds that we experienced and our investments in additional new store openings, our first quarter adjusted EBITDA did not meet our short-term quarterly expectations. That being said, we are confident that the foundation that we are building today positions us for long-term growth and we remain confident in our long-term strategic plan. Still, given the volatility in the global and domestic marketplace, we are broadening our 2026 adjusted EBITDA guidance to a range of 230 to 245 million. Despite that volatility, I am excited to share that our sales momentum is building in Q2 and that we are reiterating our 2026 guidance for same-shack sales, restaurant-level margins, and our long-term financial targets. After making the strategic decision to focus our traffic-driving investments in May and June, we are excited to see very strong performance to start May, behind the launch of our Baby Back Rib Sandwich, and anticipate strong sales growth in June as we expect to leverage the incremental traffic in some of our largest markets driven by the World Cup. And despite a slower start in April, driven in part by the shift in spring break timing associated with the Easter holiday, we're confident in our guidance for Q2 at three to 5% comp growth. Over the last two years, we have built a best in class executive team, a performance driven restaurant operating model, a sales engine that can consistently drive transaction growth, a supply chain that is increasing productivity, and a domestic development capability that is profitably accelerating the growth of our restaurant count on our way to 1,500 company operated Shacks. Shake Shack is well positioned for the balance of 2026 and beyond. Now I will discuss our progress against our strategic priorities. At Shake Shack, our performance is directly correlated to the quality of our team members. I've invested a significant amount of my time over my first two years cultivating an executive team that is uniquely positioned to achieve our ambitious aspirations. Today, I'm excited to announce the newest member of our executive team. Michelle Hook will be joining Shake Shack as our new CFO next week. When we set out on this search, I thought that it would be very difficult to find a new CFO that met every criterion that was important to us. I'm ecstatic that we found a candidate that does. Michelle comes to Shake Shack with over 25 years of public company restaurant experience, including the last five and a half years where she has served as the CFO of Portillo's. Michelle's experience leading FP&A, accounting, treasury, and IR, coupled with her long track record of leading teams with a commitment to building a strong culture, will allow her to hit the ground running and make an immediate positive impact on our organization. I look forward to introducing her to our investment community over the coming weeks. As we look to the balance of 2026, our focus will be on delivering significant value to our guests, leveraging both the numerator and the denominator of the value equation to accomplish this objective. We will employ a balanced approach leveraging premium core ingredients, culinary forward LTOs, and a focus on guest satisfaction through enlightened hospitality to drive the numerator of the value equation. For the denominator, we will continue to focus on decreasing our reliance on base pricing and employ strategic-focused price-pointed offerings like our 135 platform to profitably grow our transactions in a value-oriented macro environment. We continue to make strategic investments in marketing to drive traffic and frequency. These investments have been primarily focused on creating a foundation for long-term revenue growth, as opposed to short-term traffic bursts. We are accomplishing this by motivating new guests to enter into our app and digital channels. We have also seen a frequency increase amongst our current guests in these channels. This increase in the population of our digital community will support the launch of our loyalty program towards the end of this year, and the results of these investments have exceeded our expectations. We have grown both our digital channel guest count and app downloads by over 35% year over year. Even more importantly, the lifetime value of our digital channel guest has grown by approximately 20%, driven by an increase in frequency from this highly engaged group. These guests visit us more often and spend more on an annual basis. With these strategic platforms, we are offering an improved value equation across all household incomes. which we believe will result in a broader guest base, sustained loyalty, and greater lifetime value. These are long-term benefits from our current investments. On the brand building front, our We Really Cook campaign is resonating. We are seeing significant quarter over quarter increases in guest engagement on key media platforms as we refine our targeting and creative execution. This campaign reinforces what sets us apart, our commitment to fresh premium ingredients, cook-to-order, and true culinary craftsmanship. Our culinary team continues to deliver bold, flavor-forward innovation. Adding to our successful return of the Korean-inspired menu launch in January, we introduced our Clubhouse Pimento Cheeseburger and Pimento Chicken Sandwich in March, which was inspired by a Southern classic and reimagined with a Shake Shack twist. These items performed strong nationwide and contributed to our sales growth in Q1. In late April, we announced the return of our smoky barbecue menu platform, anchored by a first-of-its-kind barbecue boneless baby back rib sandwich, along with a new mac and cheese side. This premium protein innovation is indicative of our ability to successfully deliver more than just the best burgers in the business. The barbecue rib sandwich is made with 100% baby back pork ribs that are hand deboned, slow cooked for nine hours, and marinated in a proprietary barbecue spice blend with apple cider vinegar. It's a perfect example of our ability to develop and execute innovative Shake Shack only recipes at scale without disrupting our operations. I'm happy to report that both the baby back rib sandwich and the mac and cheese have significantly exceeded our expectations and are driving outpaced traffic and ticket growth in May. We're also expanding into new beverage occasions intended to increase relevancy in all day parts. Our new sparkling cucumber basil lemonade, our first sparkling lemonade, provides a delicious, refreshing offering to complement lunch and dinner, but also gives us a platform to drive more afternoon beverage occasions. with expected strong guest satisfaction and strong margins. All of this innovation is supported by our disciplined stage gate process that has resulted in a 12 to 18 month pipeline of innovation, which positions us to deliver a consistent cadence of high impact menu items. Our innovation strategy is driving both near term performance and long term brand relevance as we continue to differentiate Shake Shack through culinary leadership. We will continue to drive sales and traffic growth while improving our productivity across the company, and we are confident in our ability to drive continued margin improvement in a competitive inflationary environment. Foundational to those objectives is the recently announced project catalyst, our comprehensive technology initiative designed to make us more productive across our company, which will be critical to creating long-term G&A leverage. Through strengthening our digital, data, and operational framework, we expect to improve restaurant execution, deepen guest engagement, and unlock enterprise productivity, all while enhancing our ability to deliver enlightened hospitality. Let me walk you through the key components. First, we're modernizing our restaurant systems. We've partnered with Q, a cloud-native, unified commerce platform, to upgrade our point-of-sale and kitchen display system. These new systems will improve throughput, order accuracy, and consistency, particularly during peak periods. They'll also enable better orchestration across digital and in-shack ordering channels, giving our team members faster, more reliable tools so they can stay focused on what matters most, delivering hospitality to our guests. Second, we're building Shake Shack's first-ever loyalty platform. This will be a very meaningful platform for our brand. Our objectives in launching this new platform are to drive frequency, retention, and lifetime value while enabling more personalized guest communication and enlightened hospitality. It's not just about points and discounts. This capability supports our continued journey towards data-driven, targeted engagement that resonates with our guests and creates deeper connection with the Shake Shack brand. It will help us to reinforce the core principles of enlightened hospitality that launched Shake Shack as a company and continue to differentiate us in the marketplace. Third, we're investing in a new generation of proprietary AI capabilities vetted directly into daily operations. These AI tools will provide real-time operational insights, alerts, and recommendations at the Shack level and for our above Shack operational leaders. enabling faster and better informed decision making for our restaurant operators and support teams. This intelligent operating layer will deliver measurable productivity gains and form the foundation for ongoing performance enhancement over time. Finally, we're advancing a unified data and analytics platform that brings together operational performance, guest behavior, and advanced analytics. This data backbone will support improved service speed and accuracy, more personalized guest experiences, and the continued expansion of AI-driven capabilities at scale. We expect to begin rolling out these systems in the second half of 2026, and these investments position us to deliver an even better experience for our guests and team members. Turning to operations, our operations have never been stronger. and I couldn't be prouder of our team. In March, we hosted our first ever Operations Leadership Summit, where we celebrated an outstanding 2025, recognized best-in-class leaders across our company, and outlined our vision to meet both our short and long-term goals. Our operational focus in 2026 centers on two things our guests value every single time they visit us, our hospitality and the accuracy of the order that we deliver. Over the past two years, we've driven meaningful gains in speed of service, and we are now averaging under six minutes on-ticket times of cook-to-order food, a significant improvement. However, speed cannot come at the expense of accuracy, food quality, or hospitality. With the tools that we are putting in place, we expect to not only get faster, but to also get better, delighting our guests, which will in turn drive frequency and loyalty over the long term. Our operations performance scorecard continues to serve as the backbone of how we drive continuous improvement, and we've updated the metrics to reflect this sharpened focus on hospitality and accuracy. Even as a growing share of orders flow through our kiosks and digital platforms, we refuse to let efficiency come at the expense of connection. We've intentionally redeployed labor toward guest engagement through our front of house hospitality champion role. It's a deliberate investment to ensure there's a human touch point in every shack, regardless of how the order was placed. I'm also happy to report that our team member tenure and retention has continued to steadily increase. You might think that more rigor and operating discipline would create more turnover, but it's just the opposite. Our team members are experiencing a high performance environment, seeing opportunities to advance their careers, and they're staying longer. That tenure builds experience, which makes them better able to serve our guests, and that makes us a better operating company. It also allows us to develop the leaders of tomorrow, which will support our continued new shack growth. This culture has led to improved guest satisfaction across restaurant cleanliness, friendliness, and overall experience. And we're delivering these results by making sure that we have the right labor and the right shacks at the right time. Supply chain optimization continues to deliver the highest quality ingredients in a more productive way. We've restructured our internal teams to unlock productivity across every node of the supply chain model. And we've built a strategic sourcing capability that is fully connected end to end, delivering the cost visibility that we need to make smarter, faster decisions. We're partnering in new ways with both new and current suppliers, optimizing our distribution network, and leveraging our scale to drive efficiencies, all while maintaining the quality standards that define our brand. In Q1, we realized cost savings through strategic sourcing initiatives, successfully transitioning key ingredients to new suppliers who meet our rigorous specifications while providing better economics. Before making any changes, our culinary, quality assurance, and operations teams test and validate that if there is any change in taste or guest experience, it is for the better. These improvements are flowing through to better unit economics and directly supporting our priority of building and operating our shacks with best-in-class returns as we scale. Turning to our licensed business. Our licensed business continues to be a long-term strategic engine for EBITDA growth. However, the short-term results have been and will continue to be impacted by the ongoing conflict in the Middle East, driving some of our rationale for a broader adjusted EBITDA guide in 2026. The conflict has led to business disruptions ranging from temporary closures to reduced operating hours and delivery-only operations for periods of time. Beyond these impacts, inbound tourism has slowed substantially. which has further pressured sales, particularly at high traffic locations. Despite these near-term headwinds, we stand side by side with our licensed partners and the long-term opportunity in these markets. We've seen some delays in opening timelines, but as of now, we still plan to achieve our target of 40 to 45 licensed unit openings in 2026. We will continue to monitor the situation closely and provide additional updates as we move through the year. Domestically, our company-operated development pipeline remains robust. As I mentioned, we had a momentous first quarter with a record 17 openings compared to four openings in the first quarter last year. We also opened new markets, such as Naples, Florida, Tucson, Arizona, Athens, Georgia, and East Lansing, Michigan. This is the start of a record year of growth for Shake Shack. as we march toward opening 60 to 65 new company-operated shacks. We continue to see strong results from our cost containment strategies and see similar build costs for the class of 2026 as compared to last year. We also continue to invest in our existing shack base through targeted remodels and refreshes that enhance the guest experience and improve operational efficiency. I'm energized by the momentum in our business. and the opportunities that lie ahead. We have a clear strategy focused on driving Sankshack sales growth and transactions, expanding our footprint with disciplined development, and improving profitability across the enterprise. Project Catalyst will provide the technological scaffolding that we need to scale efficiently while enhancing the experience for our guests and team members. Our marketing investments are building brand strength and driving consistent traffic growth. Our culinary innovation is creating excitement and brand affinity, which differentiates us in the marketplace. And our operational improvements are delivering better guest experiences and stronger unit economics. Most importantly, we have an exceptional team executing with discipline and passion. From our restaurant team members who serve our guests every day to our leadership team driving strategy and innovation, we have the right people focused on the right priorities. I've never been more confident in our ability to build Shake Shack into the best restaurant company in the world. We're premium quality, enlightened hospitality, and a focus on supporting our team members drives prosperity for Shake Shack and our shareholders. And with that, I'll turn it over to Alison to provide more details on the quarter.