Executive Summary

Q1 2025 delivered solid double‑digit revenue (+10.5% YoY) and Adjusted EBITDA growth (+13.5% YoY) with 120 bps restaurant‑level margin expansion to 20.7%, but comps were soft (+0.2% SSS) on weather, macro pressures, and a long‑running burger LTO; GAAP diluted EPS was $0.10 and adjusted pro forma EPS was $0.14 .
Against S&P Global consensus, revenue ($320.9m) came in below the $327.6m estimate* and Primary EPS ($0.14) was below the $0.165 estimate* for Q1 2025; by contrast, Q4 2024 EPS beat ($0.26 vs $0.245*), and Q3 2024 beat on both revenue and EPS ($316.9m vs $316.1m*; $0.25 vs $0.193*) .
Management raised FY25 restaurant‑level profit margin guidance to ~22.5% (from ~22.0% prior) on operational and supply‑chain efficiencies; reiterated FY25 Adjusted EBITDA of $205–$215m, guided Q2 revenue to $346–$353m and Q2 restaurant‑level margin to 23.0–23.5% .
Near‑term catalysts: rollout of drive‑thru combos and digital menu boards to speed ordering and lift mix, guest recognition platform targeting frequency, and an accelerated new‑unit pipeline (45–50 company‑operated openings in 2025) .

What Went Well and What Went Wrong

What Went Well
- Margin execution: Restaurant‑level margin rose 120 bps to 20.7% despite traffic pressure, driven by a new labor model and food/paper and people management initiatives; Adjusted EBITDA margin reached 12.7% .
- Operational agility: “Our operators were nimble… we improved our operational efficiency following the implementation of our new standard scorecard” (CFO) .
- Strategic innovation/commercial tests: Drive‑thru combo boards reduced order time and improved accuracy and guest satisfaction; the Dubai Chocolate Pistachio Shake generated outsized demand and premium mix (CEO) .
What Went Wrong
- Traffic headwinds: Same‑Shack sales +0.2% YoY with traffic down 4.6% on weather and broader industry softness; NYC/LA/Mid‑Atlantic accounted for ~75% of negative traffic impact, while southern markets outperformed (CFO) .
- Check‑driven growth: Price/mix +4.8% (in‑Shack ~4% price; blended ~5%) supported comps as traffic declined, highlighting reliance on pricing/mix in quarter .
- Higher opex where investing for growth: Other operating expense up 70 bps YoY (marketing, higher digital mix), and G&A up vs LY as the company invests in capabilities and development .

Financial Results

Metric	Q3 2024	Q4 2024	Q1 2025	Q1 2025 Cons.
Total Revenue ($m)	$316.9	$328.7	$320.9	$327.6*
GAAP Diluted EPS	$(0.26)	$0.21	$0.10	—
Adjusted Pro Forma EPS	$0.25	$0.26	$0.14	$0.165*
Restaurant‑level Profit Margin %	21.0%	22.7%	20.7%	—
Adjusted EBITDA ($m)	$45.8	$46.7	$40.7	—

KPIs and Cost Structure

KPI / Cost Metric	Q3 2024	Q4 2024	Q1 2025
Same‑Shack Sales (YoY)	+4.4%	+4.3%	+0.2%
Average Weekly Sales (AWS)	$76k	$79k	$72k
System‑wide Sales ($m)	$495.1	$500.7	$489.4
Digital Mix	—	—	38.1%
Traffic (YoY)	—	—	(4.6%)
Price/Mix (YoY)	—	—	+4.8%
Food & Paper (% Shack sales)	28.2%	28.0%	27.8%
Labor (% Shack sales)	28.0%	26.9%	28.0%
Other Opex (% Shack sales)	14.9%	14.8%	15.6%
Occupancy (% Shack sales)	7.7%	7.6%	7.9%

Segment Breakdown

Revenue ($m)	Q3 2024	Q4 2024	Q1 2025
Shack Sales	$304.9	$316.6	$309.8
Licensing Revenue	$12.0	$12.1	$11.1

Non‑GAAP notes: Adjusted EBITDA of $40.7m excludes items including $4.5m equity‑based comp, $2.1m impairments/closures, $1.0m legal settlement, and other small items; EBITDA was $32.3m before adjustments .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Total Revenue	Q2 2025	—	$346m–$353m	New
Licensing Revenue	Q2 2025	—	$11.9m–$12.3m	New
Same‑Shack Sales	Q2 2025	—	Low single‑digits YoY	New
Restaurant‑level Profit Margin	Q2 2025	—	23.0%–23.5%	New
Company‑operated Openings	Q2 2025	—	14–16	New
Licensed Openings	Q2 2025	—	5–7	New
Total Revenue	FY 2025	—	~$1.4b–$1.5b	New/Range set
Licensing Revenue	FY 2025	—	$49m–$51m	New/Range set
Same‑Shack Sales	FY 2025	—	Low single‑digits YoY	New/Range set
Restaurant‑level Profit Margin	FY 2025	~22.0% (prior)	~22.5%	Raised
G&A Expense	FY 2025	—	~11.5% of revenue	Set
Equity‑based Compensation	FY 2025	—	$22m	Set
Depreciation & Amortization	FY 2025	—	$107m–$110m	Set
Pre‑opening Costs	FY 2025	—	$16m–$19m	Set
Net Income	FY 2025	—	$45m–$60m	Set
Adjusted EBITDA	FY 2025	$205m–$215m (prior)	$205m–$215m	Reiterated
Adjusted Pro Forma Tax Rate	FY 2025	—	24%–25%	Set
System‑wide Unit Growth	Three‑Year Targets	—	Low‑teens %	Target
RLPM Expansion	Three‑Year Targets	—	At least +50 bps per year	Target
Adj. EBITDA Growth	Three‑Year Targets	—	Low‑ to high‑teens %	Target

Earnings Call Themes & Trends

Topic	Q3 2024 (Q‑2)	Q4 2024 (Q‑1)	Q1 2025 (Current)	Trend
Macro/Traffic	+4.4% SSS; impairments elevated	+4.3% SSS	SSS +0.2%; traffic −4.6% on weather/macro; NYC/LA/DC concentrated headwinds	Softer
Supply Chain/COGS	—	—	Beef up mid‑single‑digits; F&P 27.8% (−80 bps YoY); supply‑chain initiatives to offset inflation	Improving controls
Technology/Guest Recognition	—	—	Launching guest recognition platform; targeted multi‑visit challenge; digital mix 38.1%	Building
Drive‑thru/Combos	—	—	Combo menu and digital menu boards improving ordering time, accuracy, guest satisfaction; mixing to doubles	Positive
Product Innovation	—	—	Dubai Chocolate Pistachio Shake; Summer BBQ platform; broader beverage/shake innovation cadence	Accelerating
Regional Trends	—	—	South strong (Houston/Miami/Orlando); NYC/LA/DC pressured	Mixed
Regulatory/Tariffs	—	—	Guidance assumes no outsized tariff impacts	Monitored

(“—” indicates not highlighted in press releases we reviewed for those quarters.)

Management Commentary

CEO: “We are swiftly implementing these improvements and have increased our restaurant level profit margin guidance… This marks the highest first quarter restaurant level profit margin since 2019… despite… elevated beef costs… and 3% to 4% wage inflation.”
CEO on combos/ops: “We’ve seen significant improvements in both ordering time, speed of service, accuracy and guest satisfaction… we are going to deploy those combos… across all of our drive‑throughs” .
CFO: “Traffic was down 4.6%… we estimate… more than 400 bps of traffic pressure… Check grew 4.8%, with approximately 4% in‑Shack menu price… We generated $64.2 million in restaurant‑level profit or 20.7% of Shack sales” .
CFO on FY25: “We now expect… restaurant profit margins of approximately 22.5%, an increase from our prior guidance of approximately 22%… reiterating… adjusted EBITDA of $205 million to $215 million” .

Q&A Highlights

Margin expansion levers: Near‑term gains from labor model, operational agility, and supply‑chain productivity; multi‑year confidence from processes/equipment and procurement/distribution improvements (CEO/CFO) .
Drive‑thru strategy: Combo boards improve order time/accuracy; menu architecture shifts mix (singles→doubles) and can lift attachment (fries, beverages, shakes) without broad discounting (CEO) .
Comps trajectory: Q1 was likely the low point; new menu news and improving weather supported positive low single‑digit comps in late April; Q2 guided to low single‑digits with Summer BBQ and further innovation (CEO/CFO) .
Value vs premium: Intent to protect core item price points while using premium LTOs and combos to drive mix and frequency; targeted incentives via guest recognition to lift loyalty (CEO) .
Development: Largest class ever (45–50 company‑operated) despite tariff/construction concerns; opening costs tracking at least 10% lower; recent record drive‑thru openings (CEO) .

Estimates Context

Q1 2025 vs S&P Global consensus: Revenue $320.9m vs $327.6m*; Primary EPS $0.14 vs $0.165* (miss on both) .
Prior quarters vs estimates:
- Q4 2024: EPS beat ($0.26 vs $0.245*); revenue slightly below ($328.7m vs $329.0m*) .
- Q3 2024: Beat revenue ($316.9m vs $316.1m*) and EPS ($0.25 vs $0.193*) .
Implications: Q1 shortfall reflects macro/weather and cadence of menu news; management plans to rely less on pricing, leaning on operations, supply chain, and innovation to drive comps/margins (see commentary above) .

Values retrieved from S&P Global.*

Key Takeaways for Investors

Operational excellence is offsetting macro softness: 120 bps restaurant‑level margin expansion and reiterated FY25 Adjusted EBITDA despite traffic pressure increase confidence in multi‑year profitability trajectory .
Near‑term comp drivers are in flight: combo strategy, guest recognition, and a fuller LTO/beverage calendar should help comps normalize to low‑single digits in Q2 and beyond if macro stabilizes .
Cost discipline is broad‑based: food & paper mix, supplier diversification, and freight optimization are helping manage beef inflation; marketing/digital investments are measured and front‑loaded in 1H .
Development is a meaningful earnings lever: record new‑unit class and lower build costs support durable revenue/EBITDA growth through 2025–2027 (targets: low‑teens unit and revenue growth; ≥50 bps annual RLPM expansion) .
Watch regional recovery mix: outsized exposure to NYC/LA/DC created Q1 drag; portfolio diversification toward the Southeast/Southwest should mitigate geographic risk over time .
Trading setup: Q1 miss vs consensus sets a lower bar; execution on Q2 margin (23–23.5%) and visible comp improvement from menu/marketing could be catalysts if realized .

Appendix: Additional Detail

Q1 2025 highlights: Total revenue $320.9m; Shack sales $309.8m; Licensing revenue $11.1m; Net income $4.5m; Operating income $2.8m; Adjusted EBITDA $40.7m (12.7% margin); SSS +0.2%; AWS $72k; System‑wide sales $489.4m; 11 openings (4 company, 7 licensed) .
Cost detail: Food & paper 27.8% (beef +MSD YoY, paper down MSD); labor 28.0%; other opex 15.6% (marketing, digital mix); occupancy 7.9% .
Licensing business: Revenue +11.1% YoY to $11.1m; licensing sales +10.4% to $179.6m; 256 licensed locations across 20 markets .

Shake Shack Inc. (SHAK)·Q1 2025 Earnings Summary