Shake Shack 2016 Annual Report Download - page 52

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Table of Contents
met with similar success. In January 2015, we also launched the Shake of the Week, an extension of our custard calendar where guests can enjoy seasonally
changing flavors in creamy and deliciously dense shakes.
We also made great strides this past year in our mission to Stand For Something Good. In March 2015, we announced that all burger and hot dog buns served at
Shacks around the world will be non-GMO and, in December 2015, we announced our commitment to transition to the use of cage-free eggs in our entire menu by
the end of 2016.
Our fiscal 2015 results demonstrate the success of our various growth strategies. Our brand power and thoughtful approach to growth have resulted in strong Shack
performance across a variety of geographic areas and formats. Some financial highlights for fiscal 2015 include:
▪Total revenue increased 60.8% to $190.6 million .
▪ Shack sales increased 63.5% to $183.2 million .
▪ Same-Shack sales increased 13.3% .
▪ Shack-level operating profit margin*, a non-GAAP measure, increased 96.8% to $52.9 million , or 28.9% of Shack sales, a 490 basis point increase over prior
year.
▪ Adjusted EBITDA*, a non-GAAP measure, increased 117.7% to $41.1 million .
▪ Net loss was $(8.8) million , or $(0.65) per diluted share.
▪ Adjusted pro forma net income *, a non-GAAP measure, increase d 154.9% to $12.0 million , or $0.32 per fully exchanged and diluted share.
▪ 21 system-wide Shack openings, comprised of 13 domestic company-operated Shacks and eight international licensed Shacks, representing a 33.3% increase in
system-wide Shack count.
* Shack-level operating profit and adjusted EBITDA are non-GAAP measures. Reconciliations of Shack-level operating profit to operating income and adjusted
EBITDA to net income, the most directly comparable financial measures presented in accordance with GAAP, are set forth on pages 41 and 42.
TRENDS IN OUR BUSINESS
We hit the ground running in fiscal 2016 with a strategic focus on driving long-term value creation—continuing to build the community gathering places our guests
love, while innovating around our core menu, and further investing in the unique culture that differentiates and drives our company forward. We plan to continue to
expand our business, drive Shack sales and enhance our competitive positioning by executing on the following strategies: (i) opening new domestic company-
operated Shacks; (ii) capitalizing on our outsized brand awareness; (iii) growing same-Shack sales; and (iv) opportunistically increasing our licensed Shacks
domestically and abroad.
Our primary means of growth will be opening new domestic company-operated Shacks and we believe we have a strong pipeline of Shacks for fiscal 2016. This
year we will launch in four new major markets—Los Angeles, Phoenix/Scottsdale, Dallas and Minneapolis. We will also be growing our presence in existing
markets with new Shacks planned in our home market, in Herald Square and the Fulton Transit Center in Manhattan, as well as in Queens, Long Island and other
East Coast markets from Boston to Washington D.C. Internationally, we opened our first Shack in Oman in February 2016 and have great locations planned in the
Middle East, London, Japan and now South Korea. We also plan to open one domestic licensed Shack in 2016 in Las Vegas' T-Mobile Arena.
While we believe that there is still ample room to grow our Shack-base in New York City, the majority of our domestic company-operated Shack growth is
expected to occur outside of New York City. Because our historical average unit volumes ("AUVs") have been higher, due in large part to our concentration in
urban markets, historical domestic company-operated AUVs are not a good measure of expected sales at new Shacks. As we continue to expand outside of our
established markets, we expect average annual Shack sales to be between $2.8 million and $3.2 million per Shack with Shack-level operating profit margins in the
18% to 22% range ("target-volume Shacks"), which will reduce overall company-operated Shack AUVs and Shack-l evel operating profit margins. However, given
the visibility we currently have into our pipeline for fiscal 2016, we expect the new Shacks to be opened in fiscal 2016 to average at least $3.3 million in annual
Shack sales and achieve at least 22% Shack-level operating profit margins.
Shake Shack Inc. Form 10-K | 50