Okay, we're ready to get started. Thank you. Welcome, everybody, to the conference this morning, and welcome to the session for Shake Shack. I'm David Tarantino, the Restaurants analyst at Baird, and very happy to have two members of the Shack management team here today. As you know, Shake Shack is a very popular concept within the fast-casual burger sector, with a concept that has great food and a good sort of hospitality experience for limited service. And that has led to really, really good unit volumes and good returns on capital for the restaurants. And we think it's a company that has a lot of growth potential from here. So, two members of the management team here today with us. So, to my immediate left, Katie Fogertey, who's the Chief Financial Officer. And then to her left is Michael Oriolo, who's the VP of FP&A and Investor Relations. Welcome to both of you. Thanks for being here. Great. We're happy to be here. Great. So, maybe, Katie, a good place to start is just to kind of give a high-level overview of the state of the business at Shake Shack and what the key priorities for you are this year. Great. So, just to kind of start off with, we are reiterating our 2Q and fiscal 2024 guidance that we provided last quarter on earnings. You can find all the details of that at investor.shakeshack.com. But really, kind of the key things that we're focused on this year is, number one, providing a great guest experience and a consistently great guest experience. I think that as this company has grown and expanded and added additional channels, and then also throughout, as we're all kind of aware, what happened with the staffing challenges during COVID, we have put a really big emphasis on making sure that our operators are kind of adhering to very consistently high standards across our restaurants. And we're currently in the middle of a COO search, so that will also be a big focus of that new hire. But really, the core tenet here is that we want to make sure that we are providing a wonderful experience for our guests, that our food is cooked with the highest quality, and that we're kind of driving a more consistent order experience time. And ultimately, we are doing this to improve frequency among our users. We believe that that will, over the long term, be an important driver of traffic. The second tenet that we're really focused on is improving our restaurant margins. So, we've done a really great job of moving the ball here on improving our profitability, nearly 400 basis points of margin improvement over the past couple of years. And we're basically, we've got our pre-COVID margin within sight here. We've been doing this through a number of initiatives across supply chain, also in how we're staffing our restaurants and other areas of four-wall. We're just continuing to focus on getting tighter and tighter and identifying more opportunities on that side. Then really, when you look at the other side of the equation, which is on development, it's been very challenging over the past couple of years for us and for the industry as far as build costs, delays, and so forth. Our teams have done a lot of work identifying opportunities to streamline build costs, to get tighter on development. We've committed to at least a 10% reduction in our pre-open expense and also a 10% reduction in our build costs this year. We have a line of sight to further improvements ahead. If you kind of take those first three points altogether, really what that is layering up to is regaining our best-in-class cash-on-cash returns. This is vital for our opportunity to have a robust long-term growth opportunity. Then we're also focused on clearly supporting our people. We're a people-first company. We want to continue to attract the best talent. These are really important for us to continue to invest in our team members to drive retention. Retention has been improving. We are at really strong levels. When you look back at kind of the underlying trends that have kind of played out over the past couple of quarters, it is helping us on not only the guest experience side, but also on the profitability side. Great. Great overview. Rob Lynch recently joined as CEO. I guess any thoughts from him on whether any of the strategic priorities will be changing or what's, based on your interactions with him, what are his priorities for the next few years as he thinks about joining the business here? Yeah. So, Rob Lynch is our new CEO. He started on May 20th. Kind of really interesting circumstances where we also opened up our first Shack in Pittsburgh the same day that he joined. That's his hometown. So, it was really exciting for him to be able to go out there and be there with his friends, his family, people he's grown up with, and really introduce them to Shake Shack in Pittsburgh. I'm not going to speak to him on his plans or ideas, but he's been in our Shacks, working with our team members, digging in deep, actually for a little bit of time, even prior to the start date. So, we're excited to have him here. Great. Well, good. We'll look forward to hearing more from him. And then on the COO search, is that something could you give us an update on how close or just the process you're running there and the type of person you want to hire? Sure. So, last year, and I'll just give a little bit of history too. I think it might be helpful for people. So, last year, we started our COO search kind of middle of the year. And then when Randy, the former CEO, announced that he was retiring, we felt that it was best to put that on hold until we identified who the new CEO would be and kind of let that CEO lead that search process. Shake Shack is, I think, a little bit different than a lot of the other broad, large chain restaurants out there insofar that we operate a good portion of our restaurants. We have some license, but over 300 of our Shacks in the U.S., we run ourselves. So, we're looking for somebody who has that kind of really at-scale operator experience at a large brand as well. And also somebody who will really merge with our culture and be kind of that unlock for our ability to continue to drive improvements in the guest experience, improvements in sales, and then also on the margin side. Got it. Great. I wanted to transition to ask you about a few near-term themes and maybe come back to some of the drivers of the business. I guess there's been a lot of mixed signals from consumer brand companies about the consumer spending environment over the past, I don't know, 3-6 months. I just wanted to ask you, what are you seeing in terms of the consumer spending environment? How would you characterize the backdrop? Do you want to take this one? Yeah. Yeah. I think it's pretty consistent with what we've said for the last few quarters in line with your last six months' commentary. The overall consumer seems to need a hook to transact. The lower income is probably having a little bit more pressure than the higher income. We over-index to higher income versus lower income. Now, lower income is still a large part of our business. So, we are focused on outperforming the industry, which really brings us back to all the sales-driving initiatives that you've seen us execute over the Q4 and the Q1, and we expect to continue to do that. Great. And your guidance for the year, low single-digit positive, same-store sales, is not quite as strong as what you were running in April, for example. Is that because? Could you just maybe walk us through that outlook relative to the recent trend and whether you've kind of baked in some cushion for this type of environment that we're in? Sure. I think just to level set what the fiscal year guidance is for, it is low single-digit comp with low single-digit check, right? So, as you can understand with that, there is some push and pull on traffic kind of right around that flattish. Now, when you consider that we did the 4.9% in April, what you have to think about is that really through the rest of the year, we are rolling off of price. So, with that, we're kind of assuming that same underlying strength continues ex that price. Got it. That's helpful. Just on the environment, one of the things we're seeing more and more of is promotional activity, really in casual dining and in fast food. I wanted to get your thoughts on how you think Shake Shack is positioned in an environment where it seems like the promotional activity is escalating. It's a really interesting point. Certainly, we have, and as Mike alluded to, a lot of our marketing initiatives have also come with a very targeted and well-thought-out promotional strategy on the back of it. But we are not in the value war lane. We haven't historically done things like very low-priced combo meals or 10-for-$1 type offerings. And I think where it is an interesting opportunity for us is to continue to dive into what makes us differentiated from traditional fast food, premium ingredients, commitment to quality, doing things that others are unwilling and unable to do, and still do it at a good price point. And I think going through this whole past couple of years with the inflationary backdrop, not only in supply chain, but also the labor inflationary backdrop, we have probably taken a less price than our peers have on a percentage basis. We also think that it sets us up well to be able to continue to drive value on that side. On the value side, you have, I guess, more recently run some offers. And can you talk about the effectiveness of that for your brand and how you're balancing the need to sort of get in the game to transact, as you said, Mike, versus also a need to maybe not go too far and damage the long-term health of the brand? So, I guess, how are you thinking about it? It's a really great question and something that we think about a lot. I think if you look at the promotional or the marketing advertising things that we've been doing as of late, to me, they feel very Shake Shack. So, whether it is touting our premium ingredients, the fact that we still have antibiotic-free chicken when others have had to walk away from that brand promise, the fact that we have also been leveraging just shoulder periods of the day where we want to continuously drive traffic when we have more capacity at our Shacks. I think doing that in a balanced way with also a priority to driving, first of all, overall awareness, which these are definitely doing, and trial and then repeat and frequency, but then also a priority to your own channels. It's a balance. You'll see us kind of dive into some third-party opportunities, but also we've been putting a big priority on making sure that we are continuously growing our own channels through in-Shack and our app. Then finally, it's also just a balance. Some of our marketing strategies have been going towards more of that value-add type moment. But then also, we've been increasing our brand awareness and kind of top of funnel. We've been doing some more. We know that there is a great opportunity to expand the awareness of who we are and why our food is premium and raises the bar. And so, you've seen us go into Los Angeles, Dallas. We're going to be doing more in core markets later this year to really pipe in that brand message through Connected TV. We've done billboards. We even had subway ads. I don't know if anybody saw them here. Just to keep driving and growing kind of the top of funnel while also having those lower middle funnel strategies as well. I would just add, David, we can see the incrementality and the check sizes on these promotions. We have a very good understanding of the incrementality and that it's driving new guests in a profitable, creative way. Sure. I guess, what are you looking at inside the business to understand that kind of that last question of whether maybe the value promotions that you're offering may be becoming too big of a percentage of the sales? Or how are you looking at it to make sure you don't kind of cross the line? It's a balance. We regularly pulse and survey and look at our consumers across a variety of metrics. So, that's definitely a body of work that's continuously going on in the marketing department. We're talking about it overall. Then I think if you look at also just how we've been outpacing the industry as well from a traffic standpoint, it gives us confidence. Then the latter point, and Mike alluded to this a little bit, but the checks that we're getting on the back of these value-added offers are actually quite large. That tells us that it's not necessarily that we're competing for the lowest common denominator out there or cheapening the brand. It's just kind of a hook for people to say, "Oh, I can get a free Shake Shack if I go at 2:00. Oh, let's just go do that." And then they end up getting fries and a lot of other stuff on top of it, so. Sounds good. Maybe shifting to margins, which has been a very big positive part of the story here over the last few years, actually. So, can you talk about the factors that have influenced the margin so far that you've been able to achieve all this improvement? And then I have some follow-ups just in terms of kind of what's left in the tank, so to speak, in terms of kind of driving margins higher. Sure. So, overall, we definitely have taken a much more, if I just am going to go sales, to all the way down the P&L. Traffic coming back and coming back into our restaurants has been a very big driver of our business. Our best channel out there, most profitable, is kiosk and in-Shack. And certainly kind of that tilt from the pandemic of everything being digital to then coming into our restaurants, that's been a help. And also just the overall pie growing in some of our most impacted restaurants. So, that is something to note. On the supply chain itself, though, our teams have been deep at work at a number of initiatives here to, I would say, it's not really change the product, but leverage our scale better. So, if you think about prior state, we had a single custard supplier. And that's actually very expensive to sit here and ship custard all across the country. Bringing on an additional one or maybe one down the line as well, that just gives us better economies of scale. It helps us to optimize our freight. And also, it helps us to have more frank conversations with our suppliers. Many are very excited about the long-term growth potential for Shake Shack. And so, just making sure that everybody is, we're getting the fairest price and getting the supply that we need at the quality that we need. The other thing that's been helpful on supply chain or on cost of goods is the fact that we've had better retention. So, we've talked about this a little bit, but our waste has just gotten substantially better than when it was pre-pandemic. It's also probably something that the new COO will be focused on as well. On labor, we've had tremendous gains here through a number of initiatives. I would say really last year, a lot of what helped us on that side was simply process. It is about getting tighter on our sales forecast. So, the work that both the data science team and then Mike has done and his team on FP&A to really hone in on tighter and tighter forecasts to help direct how our Shacks, our staffing has been very incremental. Then also the work that Mike has done working with all of the managers within our fleet, just making sure that they understand what the deployment schedule will look like, where people are running over, and helping to kind of course correct along the way. And then towards the end of last year, what we did was we stood up with our data science team and operations leadership with a time and motion study, really a more bespoke way of looking at labor across our restaurants. So, if you look at Shake Shack overall, and I think this is something that kind of surprised me coming in here from the outside looking in, when you're inside looking out, our restaurants are very different across our fleet, right? You have some that are very heavy dine-in mix. You have others that actually don't even have a dining room or they're in a food court. We now have drive-through as well. We also have restaurants that have a very heavy shake mix, which for all of those who don't know, we make all of our custard daily. We hand-spin all of our shakes. It's a very labor-intensive, but also delicious shake. And we also have some Shacks that are very heavy on fries, which require a lot less labor because you're just dropping baskets of fries and serving the guests. So, with all of that there and channel mix, we were able to put together a pretty bespoke labor model for each of our Shacks. And we started to test it last year. We're rolling it out now across all of our restaurants. And it's been one of those things where when we first started this, there was kind of a concern that maybe the operators would have pushed back. It wouldn't like it. And so, working with everybody and getting actually really great deployment materials in front of them about how what they see in their restaurant translates into the labor scheduling, it's been actually, they've been very enthusiastic about it. And then I just also want to point out that it's not just a cut-across-the-board type model. There's actually some restaurants where we believe that just given where certain items fall out in the model, that it does make sense for them to add a little bit of labor too to capture more sales. So, we're very, very cognizant of making sure that we're maximizing our peaks and still operating in a streamlined manner. And then on other OpEx, a couple of things at play. We've done a great job at substantially improving the profitability of our delivery channel. And kind of pre-pandemic, Shake Shack did not have delivery. We've been able to do a number of things to now currently our own white-label delivery platform is about a 5% premium to our in-Shack. And we've kept that gap between our white-label delivery and third-party at 15%. Still not our best profitable channel. Still a cost associated with delivery, but it's done a lot to really move the needle. Then on other items on there, just getting tighter on our T&E, getting more disciplined on R&M. These have all been helpful to kind of move us in a better direction on the margin front. Would you say there's still significant opportunity from here, or would you say that most of the progress has already been made? So, a lot of progress has been made. We've guided to 20.2%-21% restaurant margins this year. If you kind of look at the mid-teens level where we were kind of shaking out just a couple of years ago, that's some pretty good progress. We haven't given any guidance beyond that. I will say that in that guidance that we gave, no benefits from our labor model have been contemplated in there. There's a laundry list that the teams are still working on. At the end of the day, these are all great things. We're really excited to be doing them in a way that we don't believe is negatively impacting the guest experience. But top-line sales and our ability to leverage that is going to be really key. Makes sense. Segueing into unit growth, which is still the biggest driver of the business here going forward. Can you maybe just talk about your long-term target? You've had it out there maybe since your IPO, which was a long time ago, 450+ units. So, I know you don't want to share what a new number is today, but is it right to think that that number should be higher and at some point we would get an update on that? So, when that number was given, I mean, that was so long ago. Shake Shack was really just kind of a New York-focused brand, right? Really only had, it was still kind of a question if they would be able to, if we'd be able to grow outside of our core markets. We also did not have a digital business back then. We did not have drive-through and kind of a number of other things that have played out since then. We're seeing a lot of success with getting denser in newer markets. We are also seeing great opportunities to grow brand awareness in areas where we think that there is a potential for a lot more Shake Shacks to be and learning kind of what that can mean for a total addressable market. But really, if you kind of look at the root of the things that we've been focused on for actually the past couple of years, which is driving our profitability and now this year our big commitment to lowering our build costs and lowering our build costs next year, all of that is really just increasing our cash-on-cash returns. So, that coupled with what we see as a very robust opportunity gives us, we're positive about the long-term growth for the company. Got it. In the next several years, can you give us a sense? The current projection for this year is a low- to mid-teens type growth rate for company-operated locations. Is that a right way to think about the next at least handful of years for the company? So, we're not giving any long-term guidance targets outside of what we've guided for 2024. So, that's one. It was worth a shot. Exactly. Can you, on the cash-on-cash return or the return equation, can you maybe share for those who aren't following closely what you're aiming for there? Sure. So, long-term guidance that we've given and we talked about at the time of the IPO and something that we've really kind of over the course of the company's history have been pretty committed to is this long-term guidance for 30%-33% cash-on-cash returns. We measure that in year three. And throughout COVID, especially when you're looking at the classes that came into that year three measurement in COVID, a deeply depressed period for everybody in the restaurant sector, we had impact there. And we're just, the work that we're doing here to improve the profitability of the overall restaurants. And also, there's been a whole body of work that we've done in development to really bring all that site selection in-house and get much more scientific about that. It's set us up pretty well for not just lower build costs in the denominator driving things. It's actually pretty great economics overall for new build class. Is that the reduction in build costs that allows you to kind of maintain that level that you've been targeting or would it allow you to exceed that level that you've been targeting? What we talked about right now is building or bringing down the build costs for 2024 by 10% versus last year. We think that there is, when we look out to the pipeline, we're going to be bringing that down even more in further years. If you just think about how we've been targeting for continuous margin improvement, we have optimism around our cash-on-cash returns. Makes sense. On maybe shifting to some of the business drivers, you are increasing marketing. That's one of the things that's, I would say, maybe relatively new. And to some people in the audience, it might even be surprising because a lot of folks live in New York and know Shake Shack really well, but there's probably a lot of consumers around the country who don't. So, I guess, what do you see as the opportunity? I know Rob Lynch has a long history of brand management, so I'm sure he sees some opportunity here as well. But I guess just explain why you're leaning in on marketing and what you think the benefit of that will be. Yeah. So, when we look across all of the restaurants that we have and how we have grown into newer markets, we're seeing we have stronger brand awareness in New York, for sure. But actually, there's still an opportunity in New York to grow brand awareness. And there's been a lot more competitors come in as of late. And so, you got to kind of continue to make sure that you're maintaining that or growing that level of brand awareness. Otherwise, you're going to lose to other people coming in. So, I think there's a great opportunity there. But then if you go into newer markets that we've entered, especially those where we don't have great density or a long history with, some people, especially those who come to New York, they kind of get it. They understand it. But a lot of people don't. You've seen us lean more into brand messaging, especially on our packaging as a way to make sure that we're communicating not just our origin story and how we were found in fine dining routes and how the food that we're making is using premium ingredients. So, you'll see some of that. We're also going in deeper with brand messaging within the restaurants itself to kind of use that real estate to kind of educate consumers as to why, what this is and how this is different than maybe the burger guy down the street. And then overall, as you alluded to, we really historically have not spent that much money on marketing. We've just relied on kind of this really strong brand to help carry us. And now we're just getting smarter and smarter and leaning in more and more through performance-based marketing and also some brand marketing to just continuously drive that top-of-funnel behavior. And when you look at kind of some of the brand marketing things that we have done, if you look at Seattle, for example, two years ago, we did a brand test there. This is a big deal for us. We never really had a commercial before. And to understand, okay, when we start running in a targeted market like this, what are the lifts that we can see? We're then able to look at different markets and say, okay, what level of investment versus what level of incrementality in sales can we expect to achieve? And just keep growing and growing. We are too small to do anything from a national advertising perspective now. But we know over time that will really become a great opportunity for us. So, wanting to make sure that we have that strong muscle in-house ready to go. Makes sense. And then you mentioned operations being a big focus this year. I guess, is it really a focus on speed of service or hospitality or I guess kind of can you maybe elaborate on what you're doing there? So, we've talked about kind of the experience time or speed of service as being one of the key markers or the KPIs that we've aligned operators to achieve this year. And before, I mean, Shake Shack really had never looked at speed of service as being a real KPI. And when you start to dig into the data, you just see that there was a huge discrepancy. And I know many people probably have dealt with this before where you go into a Shake Shack and maybe it might take you a very long time to get through the queue and get your food. Other times, you might have a great experience. But it's that inconsistency we believe was hurting us. You might decide, you know what, I'm not going to go to Shake Shack today because I don't know if I have 30 minutes or 45. I need to just get in and out. So, we want to have much more consistent execution so that we give you, our guest, the confidence to be able to commit to coming to us. So, that's been a great KPI that we have been rallying around this year. It's also been really helpful for how we're thinking about operations in general, where there are locations that are not performing to that standard. Really working with our ops training team. We have a great person who just came from Raising Cane's and kind of applying that kind of framework to us as well, helping to bring that team along and identify maybe where we need to change some talent or just train better to get that more consistent experience. And then also on the hospitality side, clearly, and I think in this moment more than ever, it is really important that we fulfill all of our obligations to our guests, including accurate orders, things that are yummy and delicious. And also part of that is just a consistent time. I'm sorry, we're out of time. We ran out of time here. Well, thank you. Please join me in thanking Katie and Mike for being here today. Next in this room is Paymentus Holdings.