Shake Shack, Inc.

Good morning. Welcome to Shake Shack's second quarter 2026 earnings call. At this time, all participants have been placed in the listen-only mode. The floor will be open to questions following management's prepared remarks. It is now my pleasure to turn the floor over to Alison. 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 CFO, Michelle Hook. 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 or other quarterly reports on Form 10-Q 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 second quarter 2026 shareholder letter and our Q2 quarterly report on Form 10Q, 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.

Good morning, everyone, and thank you for joining us. Our second quarter results reflect a business that continues to execute across sales, development and profitability, despite operating in one of the most challenging cost environments we have faced in many years. While we still have a lot of work to do, I'm encouraged by our performance in the quarter and the resilience of the Shake Shack model. We remain laser focused on executing our strategic priorities throughout the remainder of the year. The quarter unfolded largely as we anticipated following the business update we provided in early June. At that time, we revised our second quarter and full year outlook to reflect several developments that emerged during the quarter, including record high beef prices, higher fuel and distribution costs, and uncertainty surrounding the potential impact from the World Cup. Today's results are consistent with that updated outlook and, importantly, reflect our deliberate focus on guest value, traffic generation, and long-term brand health. Turning to sales performance, we continue to see encouraging momentum across the business. Our teams delivered another quarter of positive traffic growth. Marking four consecutive quarters of positive traffic and extending our streak of positive comparable sales growth to 22 consecutive quarters. For the second quarter, same shack sales grew 3.5%, including positive traffic of 2.0%. Top sales, excluding any World Cup impact, landed within the range contemplated in our June update. These results reflect our ongoing investments across culinary innovation, targeted marketing, and digital engagement, designed to drive guest acquisition and frequency. We continue to refine our paid media strategy to broaden awareness of the brand while also maintaining disciplined returns on our marketing spend. We will continue to make these investments to drive traffic growth in a challenging consumer sentiment environment. Our marketing strategy remains disciplined, Not reliant on broad-based discounting. Promotional investments are targeted by channel, whether through our app or digital ecosystem, with the goal of driving incremental demand and long-term guest value. Our digital ecosystem continues to deliver traffic growth. Comparable app channel sales grew nearly 30% year-over-year, and these guests are visiting more often and spending more annually. Delivery partnerships are also expanding our reach in markets where we have room to build awareness and trial. And over the summer, we were able to strategically leverage these partnerships and their World Cup initiatives to drive traffic for our brand. Importantly, these channels are not just driving individual transactions. They are introducing new guests to the brand, creating lifetime value. We are building the data and capabilities to better understand guest behavior and personalize engagement opportunities at scale, which is foundational to our upcoming loyalty platform launch. In the second half of the year, we are expanding our lifecycle marketing through the delivery of behavior-based communications, targeted offers, and automated guest journeys designed to increase frequency, accelerate second visits, and strengthen retention, all while maintaining our promotional disciplines. Our 246 digital offers continue to drive app engagement and support frequency among existing guests. As I mentioned earlier, comparable app sales are up nearly 30%. Separately, our delivery channel performance improved as we continue to strategically partner with third-party providers, resulting in strong traffic gains. These channel-specific investments are designed to create value without compromising the integrity of our core menu or our premium positioning. Our strategy balances culinary innovation with digital value, widening our reach without compromising our premium positioning. Our barbecue platform, illustrated by Baby Back Rib Sandwich, met our expectations and resonated strongly with guests. This product line reinforced our belief that Shake Shack will continue to lead with differentiated culinary innovation that drives excitement, traffic, and check growth. Looking at the second half, we're making the Big Shack a core menu item, given its strong guest response. And in July, we launched a new West Coast-inspired menu platform. We also brought back the Dubai Chocolate Pistachio Shake, which continues to resonate and gives us a differentiated platform for future premium shake LTOs. We are also testing new chicken offerings, building on the Korean Chicken Sandwich's performance and a smoked brisket platform. as we continue balancing proven favorites with disciplined innovation testing. Turning to margins, this quarter's results reflect the underlying strength of our model. As we discussed in June, beef inflation accelerated throughout the quarter and peaked in June, exceeding our original expectations and driving the majority of restaurant-level margin pressure that we saw. Rather than fully offsetting those costs through pricing, we chose to preserve our value positioning and Guest Proposition. At the same time, our teams made real progress operationally, continuing to optimize our labor model, maximizing labor attainment, and using our technology to run efficient restaurants while enhancing the guest and team member experience. Running better operations to improve the experience in our restaurants will always be job number one. We are also continuing to pursue supply chain opportunities that maintain or improve product quality, capture more competitive pricing, drive efficiencies across our business, and mitigate commodity and distribution pressures over time. Together, these efforts allowed us to deliver healthy restaurant-level margins despite a backdrop of significantly elevated beef costs. On the development side, we continue to grow our footprint. During the quarter, we opened 16 new company-operated shacks, bringing us to 33 openings year-to-date as of the end of the quarter, and we remain on track to open 60 to 65 company-operated shacks this year, sustaining our strong development momentum. This quarter's openings were all in existing markets, reflecting the meaningful white space we continue to see across our current footprint. Our build costs remain consistent with the levels expected. Our confidence in the long-term opportunity to expand our footprint remains unchanged, and we are encouraged by the productivity of our newer shacks as they track towards our expected cash-on-cash return targets. Our licensed business also continued to perform well despite a challenged global environment. We opened eight net new licensed shacks in the quarter, led by strength in USA airports and Canada. Total licensing sales grew 7.6% year-over-year to $222.4 million, and licensing revenue grew 7.1% to $14.2 million. The ongoing conflict in the Middle East continued to weigh most heavily on the UAE, historically our highest volume market in the region and one that has been especially dependent on tourism, partially offset by strong performance in markets such as Canada, the United Kingdom, and parts of China. Our license pipeline remains on track to deliver 40 to 45 new Shacks this year. Before I conclude, I would like to briefly touch on technology and our long-term strategic capabilities. Project Catalyst remains our foundation for scaling efficiently while improving the guest and team member experience, spanning our POS rollout, loyalty platform development, and the integration of AI-enabled capabilities across the business. We are also evolving our unified data and analytics platform, bringing together operational performance and guest behavior, supporting faster, more accurate service, more personalized guest experiences, and continued expansion of our AI capabilities at scale. These investments are not just technology projects. They are foundational to our growth strategy, decision-making, and guest connection, which we anticipate will support our path to G&A leverage moving forward. Before turning the call over to Michelle, I want to reinforce how we are thinking about the balance of the year. We know the back half carries real headwinds, tougher comparisons, beef inflation that we expect to remain elevated, continued competitive intensity, and uncertain macro environments. We remain a premium brand with a proven unit economic model, positive traffic momentum, Disciplined Operators, and Structural Margin Resilience that has held up through one of the toughest input cost environments that we have seen. We are focused on our ability to deliver sustainable long-term growth. We will continue to execute against our strategic priorities throughout the remainder of the year. Finally, I would like to take a moment to welcome Michelle to our first earnings call as Chief Financial Officer. Since joining the company, Michelle has quickly established credibility across the organization. She has immersed herself in every aspect of the business, built strong relationships throughout the leadership team and finance organization, and has already become a valuable contributor to our strategic and operational decision making. We are thrilled to have Michelle on the team and excited about the leadership and perspective she brings to Shake Shack. With that, I'll turn the call over to Michelle.