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Shake Shack Inc. (SHAK)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered strong topline and margin performance: total revenue $328.7M (+14.8% YoY), same‑Shack sales +4.3%, restaurant‑level margin 22.7% (+290 bps YoY), and adjusted EBITDA $46.7M (+48.6% YoY) .
  • Guidance: FY2025 revenue ~$1.45–$1.48B, restaurant‑level margin ~22%, and adjusted EBITDA raised to $205–$215M; Q1 2025 revenue $326.5–$330.9M, SSS +2.5%–3.5%, margin 20.0%–20.5% .
  • Operations and supply chain initiatives (new labor model, more suppliers, freight optimization) underpinned margin expansion despite beef inflation and weather/wildfire headwinds; January SSS still grew +3.7% despite ~150–200 bps traffic pressure .
  • Strategic catalysts: acceleration of unit growth (45 company‑operated and 35–40 licensed in FY2025), drive‑thru optimization (menu bundling coming), kitchen innovation lab, and long‑term footprint target of at least 1,500 company‑operated Shacks .

What Went Well and What Went Wrong

What Went Well

  • Broad-based growth: total revenue +14.8% YoY to $328.7M; SSS +4.3% driven by Black Truffle LTO and increased marketing; AWS up to $79K (+4% QoQ and YoY) .
  • Material margin improvement: restaurant‑level margin reached 22.7% (+290 bps YoY), with labor down 160 bps YoY (new activity‑based labor model) and COGS down 110 bps YoY (paper/packaging savings) .
  • Management confidence and strategic clarity: “We expect… to expand our Restaurant‑level profit margin to approximately 22%, and drive Adjusted EBITDA growth of 17%–22%” (CFO); “target Company‑operated footprint of at least 1,500 Shacks” (CEO) .

What Went Wrong

  • Weather and LA wildfire impacts created near‑term traffic headwinds of ~150–200 bps; January still delivered +3.7% SSS, but recovery in LA expected to take time .
  • Beef inflation remained a pressure (low single‑digit YoY in Q4; outlook mid‑to‑high single digits in 2025), requiring careful pricing/mix management and supply chain actions .
  • Q1 2025 comps face laps from strong prior LTO cadence (Korean BBQ) and calendar shifts (Easter); marketing/G&A more front‑loaded in H1’25, implying near‑term OpEx step‑ups .

Financial Results

Consolidated and Key Metrics

MetricQ4 2023Q3 2024Q4 2024
Total Revenue ($USD Millions)$286.2 $316.9 $328.7
Shack Sales ($USD Millions)$275.8 $304.9 $316.6
Licensing Revenue ($USD Millions)$10.5 $12.0 $12.1
Operating Income ($USD Millions)$(1.3) $(18.0) $10.2
Net Income ($USD Millions)$7.3 $(11.1) $9.3
Net Income Attributable to SHAK ($USD Millions)$7.2 $(10.2) $8.7
Diluted EPS ($USD)$0.17 $(0.26) $0.21
Adjusted EBITDA ($USD Millions)$31.4 $45.8 $46.7
Restaurant‑Level Profit Margin (%)19.8% 21.0% 22.7%
Same‑Shack Sales (YoY %)3.0% 4.4% 4.3%
Average Weekly Sales (AWS, $USD ‘000)$76 $76 $79
System‑Wide Sales ($USD Millions)$442 $495 $501

Segment & Composition

MetricQ4 2023Q4 2024
Shack Sales ($USD Millions)$275.8 $316.6
Licensing Revenue ($USD Millions)$10.5 $12.1
Licensing Sales ($USD Millions, operating measure)$166.4 (Fiscal Dec’23) $184.1 (Fiscal Dec’24)
Licensing Revenue YoY Growth (%)—15.1%
System‑Wide Sales ($USD Millions)$442 $501

KPIs and Operating Detail

KPIQ3 2024Q4 2024
Traffic (YoY %)+0.3% −0.5%
Price/Mix (YoY %)~6% price; mix negative low single digits +4.8% (in‑Shack ~+4.5%; total price ~+6%)
AWS ($USD ‘000)$76 $79
Company‑Operated Openings8 19
Licensed Openings9 9
System‑Wide Shack Count (End of Period)552 (Q3’24) 579 (Q4’24)

Non‑GAAP adjustments (Q4’24): EBITDA adjustments totaled $7.5M (equity‑based comp $4.4M; impairments/closures $1.7M; restatement costs $0.8M; cloud amortization $0.6M), resulting in adjusted EBITDA $46.7M (14.2% of revenue) .

Guidance Changes

MetricPeriodPrevious Guidance (Jan 13, 2025)Current Guidance (Feb 20, 2025)Change
Total Revenue ($USD)FY 2025$1.45B–$1.48B $1.45B–$1.48B Maintained
Licensing Revenue ($USD)FY 2025$49M–$51M $49M–$51M Maintained
Same‑Shack Sales (YoY %)FY 2025~+3% ~+3% Maintained
Restaurant‑Level Margin (%)FY 2025~22.0% ~22.0% Maintained
Adjusted EBITDA ($USD)FY 2025$200M–$210M $205M–$215M Raised
G&A (% of Revenue)FY 2025~11.5% ~11.5% Maintained
Equity‑Based Compensation ($USD)FY 2025~$22M ~$23M Slightly higher
D&A ($USD)FY 2025$108M–$112M $108M–$112M Maintained
Pre‑Opening ($USD)FY 2025~$17M ~$17M Maintained
Net Income ($USD)FY 2025$45M–$60M $45M–$60M Maintained
Company‑Operated OpeningsFY 2025~45 ~45 Maintained
Licensed OpeningsFY 2025~35–40 ~35–40 Maintained
Total Revenue ($USD)Q1 2025—$326.5M–$330.9M New quarterly
Licensing Revenue ($USD)Q1 2025—$10.5M–$10.9M New quarterly
Same‑Shack Sales (YoY %)Q1 2025—+2.5%–3.5% New quarterly
Restaurant‑Level Margin (%)Q1 2025—20.0%–20.5% New quarterly

Earnings Call Themes & Trends

TopicQ2 2024 (Previous Mentions)Q3 2024 (Previous Mentions)Q4 2024 (Current Period)Trend
AI/Technology, Kiosks & Guest RecognitionFocus on kiosk rollout; guest recognition workstreams beginning Building loyalty and guest recognition platform; surgical digital incentives Investing in tech; new CIO (Jan 10 PR); guest recognition to link app/web with in‑Shack kiosks Up
Supply Chain & InflationStrategic procurement; cost‑to‑serve reductions Paper/packaging savings; added suppliers; offset inflation COGS 28.0% (−110 bps YoY); beef LSD up; further savings planned Improving
Tariffs/Macro ExposureNot a major focus—Sourcing mainly domestic; monitoring potential tariff effects; not in guidance Watchlist
Product Performance (LTOs)Summer BBQ; strong mix support Black Truffle returns; Chicken Sundays; positive traffic Black Truffle drove Q4; truffle run >4 months; adjust cadence in 2025 Mixed (optimize cadence)
Regional TrendsContinued growth across markets Double‑digit SSS in FL/AZ/GA/OH Strong SSS in FL/GA/AZ; Northeast softer; LA wildfire impact Mixed
Regulatory/Legal—Nine Shack closures (impairment $26.4M); limited profit impact Restatement cost $0.8M; legal accruals noted in non‑GAAP Stabilizing
R&D/Kitchen Innovation—Operational optimization; future kitchen flow/equipment work New kitchen innovation lab (Atlanta); accelerate process/equipment testing Up
Drive‑Thru StrategyDrive‑thru openings (3 in Q3) Prioritized order/throughput improvements Menu bundling coming; process/format refinements; single‑lane example strong times Up

Management Commentary

  • CEO Rob Lynch: “We grew Total revenue 14.8% with 4.3% same‑Shack sales growth, and grew Adjusted EBITDA 48.6%… we are… excited about our new target Company‑operated footprint of at least 1,500 Shacks” .
  • CFO Katie Fogertey: “This quarter marks our 10th consecutive quarter of expanding our Restaurant‑level profit margin year‑over‑year… In 2025, we expect… margin to approximately 22%, and drive Adjusted EBITDA growth of 17%–22%” .
  • Speed of service and accuracy: “Average wait time improved by 1+ min YoY… best order accuracy on record” .
  • Labor model: “First full quarter… drove ~80 bps benefit… coupled with stronger operations” .

Q&A Highlights

  • Margin confidence: Management raised FY2025 adjusted EBITDA to $205–$215M on better labor management and supply chain savings, evenly split as drivers of expansion toward ~22% restaurant margins .
  • Loyalty/digital incentives: Avoid deep discount points programs; targeted, hospitality‑driven recognition across app/kiosk to drive frequency and mix (self‑selection trade‑up) .
  • LTO cadence: ~3–4 big LTO windows per year; truffle LTO likely too long at ~4.5 months; plan to refresh cadence to stimulate trial .
  • Speed of service: −1 minute YoY improvement; still aiming for another minute reduction; big impacts at peak hours and drive‑thru .
  • Drive‑thru optimization: Menu bundling imminent; kitchen/process/equipment initiatives to reduce order times; single‑lane drive‑thru outperformed on times .

Estimates Context

  • We attempted to retrieve Wall Street consensus (S&P Global) for Q4 2024, Q1 2025, and FY2025 (Revenue, EPS, EBITDA), but the SPGI endpoint returned a Daily Request Limit Exceeded error; therefore, consensus estimates were unavailable at this time [functions.GetEstimates].
  • Implication: Comparisons vs consensus cannot be provided for this recap; subsequent revisions to EBITDA guidance (+$5M range raise) suggest potential upward estimate adjustments in models focused on operating leverage and margin progression .

Key Takeaways for Investors

  • Mix of topline and margin: Q4 produced both strong revenue growth (+14.8%) and margin expansion (restaurant‑level margin 22.7%), signaling multi‑pronged execution (marketing, operations, supply chain) .
  • Near‑term caution: Q1 faces weather/wildfire and LTO lap pressures; guided SSS +2.5%–3.5%, margin 20.0%–20.5%—watch cadence of marketing/G&A front‑loading .
  • Medium‑term thesis: Raised FY2025 adjusted EBITDA guidance to $205–$215M on sustainable labor/supply chain improvements and measured pricing; margin expansion targeted without relying on outsized price increases .
  • Structural growth: Acceleration of unit openings and drive‑thru optimization, plus kitchen innovation lab, should support AUVs and returns; long‑term footprint potential of ≥1,500 company‑operated Shacks is a significant optionality lever .
  • Watch costs: Beef inflation mid‑to‑high single digits in 2025 and any tariff impacts; supply chain initiatives and multi‑sourcing mitigate, but commodity volatility is a key variable .
  • Tactical trade: Momentum in AWS, recurring margin gains, and raised EBITDA guide are positive catalysts; monitor monthly comp cadence and evidence of drive‑thru/menu bundling execution for incremental upside .