Shake Shack Inc. reported financial results for the fourth quarter and the fiscal year ended December 28, 2016, periods that included 13 and 52 weeks, respectively.

Financial Highlights for the Fourth Quarter 2016:

Total revenue increased 43.5 percent to $73.3 million.

Shack sales increased 43.8 percent to $70.9 million.

Same-Shack sales increased 1.6 percent.

Shack-level operating profit, a non-GAAP measure, increased 29.9 percent to $18 million, or 25.4 percent of Shack sales.

Net income was $3.9 million, or $0.15 per diluted share.

Nine net system-wide Shack openings, including six domestic company-operated Shacks and three net licensed Shacks.

Financial Highlights for the Fiscal Year 2016:

Total revenue increased 40.9 percent to $268.5 million.

Shack sales increased 41.6 percent to $259.4 million.

Same-Shack sales increased 4.2 percent.

30 net system-wide Shack openings, including 20 domestic company-operated Shacks and 10 net licensed Shacks, representing a 35.7 percent increase in system-wide Shack count (net of closures).

Randy Garutti, chief executive officer of Shake Shack, says, “I am proud of what our team has achieved in our second full year as a public company. I’m especially pleased given the challenging industry backdrop in retail and restaurants. And, we achieved all of this while furthering our commitment to growing in premier locations, and building an even better team member and guest experience that fosters the long term strength of the Shake Shack brand for years to come. Looking ahead, 2017 is shaping up to be an exciting year of growth with a strong pipeline of new domestic openings, as well as the evolution of the Shack App, which is just one part of our long term strategy to meet our guests, whenever, and wherever they are.”

Development Highlights

During the quarter, the company opened six domestic company-operated Shacks, which included its first Shack in Houston at The Galleria, a Shack in New York’s Penn Station, and a new free-standing model Shack in Delaware across from the Christiana Fashion Center, as well as additional Shacks in the California, Georgia, and DC markets. Additionally, the company opened four international licensed Shacks during the quarter, including its second Shack in Korea in the Cheongdam neighborhood, as well as additional Shacks in the United Kingdom and Middle East markets, and a domestic licensed Shack at the Wells Fargo Center in Philadelphia.

Subsequent to the end of the quarter, the company opened its first Shack in Detroit, Michigan, a third Shack in Connecticut and a fourth Shack in the California market in Century City. The company also opened two licensed Shacks in London at Canary Wharf and Victoria Nova, as well as five additional Shacks in the Middle East.

Fourth Quarter 2016 Review

Total revenue, which includes Shack sales and licensing revenue, increased 43.5 percent to $73.3 million in the fourth quarter of 2016, from $51.1 million for the fourth quarter of 2015. Shack sales for the fourth quarter of 2016 were $70.9 million, an increase of 43.8 percent from $49.3 million in the same quarter last year due primarily to the opening of 20 new domestic company-operated Shacks. Licensing revenue for the fourth quarter was $2.4 million, an increase of 34.6 percent from $1.7 million in the same quarter last year, primarily due to the opening of 10 net new licensed Shacks, offset by lower licensing revenue from Shacks in the Middle East as a result of the macroeconomic conditions in the region.

Same-Shack sales increased 1.6 percent for the fourth quarter of 2016 versus 11 percent growth in the fourth quarter last year. The comparable Shack base includes those restaurants open for 24 months or longer. For the fourth quarter of 2016, the comparable Shack base included 30 Shacks versus 21 Shacks for the fourth quarter of 2015.

Average weekly sales for domestic company-operated Shacks was $90,000 for the fourth quarter of 2016 compared to $89,000 for the same quarter last year, a 1.1 percent increase, primarily due to increased menu prices and favorable shifts in sales mix from menu innovation.

Shack-level operating profit, a non-GAAP measure, increased 29.9 percent to $18 million for the fourth quarter of 2016 from $13.9 million in the same quarter last year. As a percentage of Shack sales, Shack-level operating profit margins decreased 280 basis points to 25.4 percent primarily due to increased labor and related expenses resulting from the company-wide increase to the starting hourly wage that was implemented at the beginning of the fiscal year, increased medical claims and staffing investment to support future Shack growth, as well as higher repair and maintenance and utilities costs. These increases were partially offset by lower commodity costs, primarily beef. A reconciliation of operating income to Shack-level operating profit, the most directly comparable GAAP financial measure, is set forth in the schedules accompanying this release.

General and administrative expenses increased to $8.3 million for the fourth quarter of 2016 from $7.7 million in the same quarter last year. As a percentage of total revenue, general and administrative expenses decreased to 11.3 percent for the fourth quarter of 2016 from 15 percent in the fourth quarter last year, primarily due to $0.8 million of expense recognized during the prior year quarter related to a legal settlement and increased levels of Shack sales.

Net income was $3.9 million, or $0.15 per diluted share, for the fourth quarter of 2016, compared to $1.2 million, or $0.07 per diluted share, for the same period last year.

Fiscal Year 2016 Review

Total revenue increased 40.9 percent to $268.5 million for fiscal 2016, from $190.6 million for fiscal 2015. The growth in Shack sales was primarily driven by the opening of 20 new domestic company-operated Shacks, as well as same-Shack sales growth.

Shack sales for fiscal 2016 were $259.4 million, an increase of 41.6 percent from fiscal 2015. Same-Shack sales increased 4.2 percent during fiscal year 2016 versus 13.3 percent growth in the prior year. For fiscal 2016, the comparable Shack base included 30 Shacks, compared to 21 Shacks for fiscal 2015.

Shack-level operating profit, a non-GAAP measure, increased 38.6 percent to $73.3 million for fiscal 2016 from $52.9 million for fiscal 2015. As a percentage of Shack sales, Shack-level operating profit margins decreased approximately 60 basis points to 28.3 percent primarily due to increased labor and related expenses resulting from the company-wide increase to the starting hourly wage that was implemented at the beginning of the fiscal year and staffing investment to support future Shack growth, as well as higher repair and maintenance and utilities costs. These increases were partially offset by lower commodity costs, primarily beef. A reconciliation of operating income to Shack-level operating profit, the most directly comparable GAAP financial measure, is set forth in the schedules accompanying this release.

General and administrative expenses decreased to $30.6 million for fiscal 2016 from $37.8 million for fiscal 2015. As a percentage of total revenue, general and administrative expenses decreased to 11.4 percent for fiscal 2016 from 19.8 percent in fiscal 2015, primarily due to non-recurring expenses incurred in the prior year, including $12.8 million of non-recurring compensation expenses, $0.6 million of IPO-related expenses and $0.8 million of expense related to a legal settlement.

Net income was $12.4 million, or $0.53 per diluted share, for fiscal 2016, compared to net loss of $8.8 million, or $0.65 per diluted share, for the same period a year ago.

2017 Outlook

For the fiscal year ending December 27, 2017, the company is providing the following financial outlook:

Raising total revenue guidance to between $349 million and $353 million (vs. $348 million and $352 million).

Same-Shack sales growth between 2 percent and 3 percent, which includes approximately 1.5 percent to 2 percent of menu price increases taken in early January and nominal traffic and mix increases.

Increasing previous development plan guidance to between 22 and 23 (vs. between 21 and 22) new domestic company-operated Shacks (with average annual sales volumes of at least $3.2 million and Shack-level operating profit margins of at least 21 percent).

Increasing to 11 net new licensed Shacks to be opened in fiscal 2017 (vs. 10 net).

Shack-level operating profit margin between 26.5 percent and 27.5 percent.

Increasing general and administrative expenses to between $38 million and $40 million (vs. $37 million to $39 million).

Increasing depreciation expense to approximately $22 million (vs. $21 million).

Interest expense between $1.6 million and $2 million.

Adjusted pro forma effective tax rate to between 40 percent and 41 percent.