Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Shack Shack Third Quarter 2017 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode. And the lines will be open for your questions following the presentation. Please note that this conference is being recorded today, November 1, 2017. On the call today we have Randy Garutti, Chief Executive Officer; Tara Comonte, Chief Financial Officer; and Josh Omin, Vice President of Finance and Investor Relations. And now, I'd like to turn the conference over to Mr. Josh Omin.

Thank you, operator, and good evening to everyone. By now, you should all have access to our third quarter 2017 earnings release, which can be found at investor.Shackshack.com in the financial info section. Additionally, this quarter we have posted supplemental third quarter earnings slides, which can be found in the events and presentation section on our site or has an exhibit to our 8-K for the quarter. Before we begin our formal remarks, I need to remind everyone that our discussions today will include forward-looking statements. These forward-looking statements are not guarantees of future performance and therefore you should not place undue reliance on them. Actual results may differ materially from those indicated by these forward-looking statements due to a number of risks and uncertainties, including those in the Risk Factors section of our Annual Report on Form 10-K, which was filed on March 13, 2017. Additionally, any forward-looking statements represent our views only as of today, and we assume no obligation to update any forward-looking statements if our views change. During today's call, we will also discuss non-GAAP financial measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are available in our earnings release and the appendix of the aforementioned supplemental materials. Now I'd like to turn the call over to Randy.

Thank you, Josh, and good evening to everyone on the call today. During the third quarter, we delivered robust growth and profitability. The total revenue increasing 27% to 94.6 million and adjusted EBITDA growth of 20% to 18.2 million, compared to the third quarter of 2016. As 2018 comes into view, our focus remains on executing against those key cores of our strategy that will continue to fuel global growth. The Shack Shack experience in today's world of convenience is a key component of the overall growth strategy. I'm excited today to share with you some of the technology initiatives we launched to date and talk about those still to come. We're actively testing throughput enhancement initiatives with kitchen design in most new and existing Shacks. Our marketing team is working towards the future of ever increasing personalization and connection with our guests. Our menu innovation team continues to experiment and innovate on the culinary side of our business driving excitement this year and beyond. Our development and design team is delivering an accelerated pace of unit openings, while continuing to secure premium sites due to the strength of our brand, at the same time designing some of the most dynamic community gathering places we've ever built. In this rapidly evolving consumer environment, I'm prouder than ever of our teams, as they remain nimble and innovative, delivering the best of the Shack experience to our guests and communities regardless of the challenge. In the third quarter, we opened four domestic company-operated Shacks and five licensed Shacks. For the full year of 2017, we're now increasing our guidance and to expect to open a minimum of 24 Shacks. There is a possibility we could open up to 26 Shacks if construction permitting are favorable. If we do though, those Shacks will…

Thanks, Tara. Shake Shack is a growing, loyal and connected community and we are relentlessly focused on excellence, experience and hospitality. To continue to deliver on this promise next year and beyond we are committed to elevating our performance and accountability more deeply understanding our guests, executing the basics with brilliance every day, building our business infrastructure and driving smart and profitable growth. We believe we are in an incredible strong position to continue to expand and grow. Leveraging the strength of the Shake Shack brand execute against the significant opportunity ahead. With that, I want to thank you all for joining today's call and operator you may go ahead and open the line for questions.

Thank you. [Operator Instructions] Thank you. We will take our first question from Jake Bartlett with SunTrust Bank. Please go ahead.

Great, thanks for taking the question. The first question was kind of a near term one in - you are trying to understand what the same store sales guidance for the year will implies for the fourth quarter. I know sometimes is waiting difference, I will think that having Christmas Eve kind of move forward it gives you a Saturday and things like that could help it. Maybe just to help us understand it looks to me like the range could be at anywhere between negative 2% or flat, but if you can get us a little closer that will be helpful.

Yeah, thanks Jake. Yeah, I mean you saw we more cautiously guided the negative 2 to 3 last quarter. We brought that up now to 1.5 to 2. We are right around that 2 mark right now at the end of the third quarter. So we time that range based on the trends that we have been seeing a little bit, as you said. Let's hope to get a little bit of benefit of a better timing of holidays this year that we know impact more negative this year, but that will see. So we are not going to break out the cadence of that just yet, but again the trends improve from the first half of the year and we knowing that the other thing which is seen clearly is little bit better weather so far this Fall in the North East so that's important that trend to change the guidance.

Great and then when you think about the drags issue or the negative traffic that you are building in for '18, it has been little bit worse than what you guiding to '17. Is some of that maybe less of a drag from cannibalization [ph] or in a way to kind of frame how much you think cannibalization has been herding what it's going to look like in '18 given with that you know where those are going to open in close approximately to comp stores or any hope on that front with you.

A couple of ways to think about that Jake, first of all it would be we appropriate full year guidance on our next call. This one will give you directions. It is too early to say what next year looks like obviously you sitting in November. The trends from this year having traffic, we won't hope that we can turn that around, but at this point we are going to remain cautious. And as we look everything with a bigger class I hope to get any potential cannibalization smooth out and continue to smooth out overtime as the comp dates get bigger for adding 4 more Shacks this quarter and in the year over 40, but it's still a small base and still very much impacted by regional swing. So as we add those 32 to 35 more Shacks next year, our hope is that will be step up in each year in a larger class we continue to have a little bit less volatility, but we will give proper guidance in our coming up.

Great, and then lastly, I don't think I heard you update on what your expected AUVs are for the 17 class second class you had was 3.4. Maybe if you could update that if you have an - and yet and then maybe give us an idea of what you are expecting for 2018 overall.

Yeah, we not only chose to the due Jake, we got chance to see, but we added a lot of supplemental numbers this time. I encourage you look at that posted on our IR site and we did there as we give quite a bit more information than we've ever given regionally on AUVs and what we wanted to do instead of taking a moment in time snap shot of AUV. That is reflected in our retail sales as we noted in the script here. If you look at it we did a trailing 12 months in that supplemental pack. I think that will be more helpful to as you look at, but look as you've said for many years that we continued add Shacks at all kind of volumes especially with our larges class of Shacks yet both '17 and then here in '18 again. We expect that AUV number to decline. So I think that is the best way for you to look at it for the '17 class in that supplement.

Great, thank you very much.

The queue will go next to Andrew Charles with Cowen & Company. Please go ahead.

Great, thanks. I want just a follow up on that last question as well as just on the first year sales volumes and appreciate the detail on the presentation, but those mostly looks like they're existing Shacks that have been open for more than a period of years so is it wrong to think that 3.4 million isn't the right number I mean just the revenue range, it was raised to the high end of the range relative to the increase that you saw in the unit curves as well as the same store sales.

Well, we haven't changed it, but just to be clear when you look at that supplementary includes all Shacks, so the 79 Shacks that are opened at the end of Q3. So those are in there for the short time period that they have, so we haven't updated you on that number for the '17, so you should stay in that similar range. Again and we've got - we just opened a few restaurants we've got between three and five to go. So there is so much of the class here is going to happen in the fourth quarter. So we will update when we can on how that - how those early openings go. We continue to be encouraged of other new Shacks. If you look at - we just opened in San Diego, we got Astor Place, we got Morningside Heights, in New York and then were down south. There's all sort of Shacks across the spectrum of sales that have continued in '17, but we obviously like the class and like to look at '18.

Yeah, on the change in area of US you guys have seen a little bit of dip down there and so is this the right level. You are this down 11.7 that we calculated, is that the right level do you think about going forward just based on for next year?

I think that level will continue to come down. Right, we have said that for a long time. When you look at that around the high fours today when you had those numbers in today, but we absolutely expect that to come down and we will give you a class mix as you look at '18. We are continuing to looking at hitting along those long term $3 million Shacks and we will update you better on that in the guidance, when you look at next year.

My next question is Randy how wide spreads do every pilot and which you cannot think about expanding is one of factors or what the every factors to digital order mix I mean can you talk more about where that trended, I think when you first launched as around 3% I think the launch the android platform and just curious with that running up into the quarter.

Yeah, so we haven't got the exact numbers what we can say is the Shack app mobile continues to grow as a percentage of sales. We are encouraged by that. In the delivery, too major delivery pilots we did with DoorDash and Caviar, it was certainly not all of our Shacks, and roughly about half the Shacks were impacted between the two. So as I said in my remarks we - it's very clear people want to check delivery and we are working patiently to make sure we continue to test and learn and see who the best partner or partners maybe depending on the region. That's part of our discussion and all that.

Okay, great. Thank you.

Thank you we will go next to Sharon Zackfia with William Blair. Please go ahead.

Hi, good afternoon. I guess a few questions first on labor. It actually looks much better controlled and the September kind of a similar comp to the second quarter where much less to the leverage that just curious if there is anything new you doing there at all. Now controls in that labor pressure that you are seeing and then looking at the regional information that you gave in the supplemental documents. I guess I am just curious that the Mid West operating profit looks really good kind of what's going on in the Mid West?

Well, Sharon, you live there, first of all, so that's the - it's a similar favor shops there. What's going on the Mid West, we've got a couple of things happening in there. We have got very favorable supply chain in the Mid West right being in the center of the country, we have some of our best cost of goods happen in those Shacks, those are Shacks that are continuing to grow and it specifically we had some really good starts. For our Chicago Shacks are strong, we got a really good start in Detroit this year and as we grow in Minnesota , which is kind of good region for us so - yeah there AUVs are very high. On your comp question, a couple of things, when the company is better it always looks better so that was a negative of one fifth this quarter in improvement, we look over better. And we are getting better as we keep managing our Shacks better and that's an ongoing process. We are just going to continue sort of find little ways here and there, there is no major revolution, but that said next year we got massive minimal wage increases coming, we've got different legislation coming and we will get back to you on guidance for that for next year, but we do expect labor to continue and increase next year and beyond. So we are happy with the way the team managing this quarter not something we think is going to get any better in the near term.

Yes, Randy when you talk about kind of optimal labor within this horizon and not just from a car [ph] stand point,, but just an execution is that coming in your organization more from the top down or do you have kind of a more entrepreneurial band whether the managers are getting together in regions and sharing information.

Yeah, it's option B there. We have some incredible area directors, some regional directors of off suit [ph] looking together all time. Today our team was in this office talking about this very question and how we are going to grapple with next year, how we are going to bonus our team, so how we are going to send [indiscernible] and not cut labor for the wrong reason. We are the kind of company as you have seen, we like to drive sales. But we got very little labor pressure so we are going to keep finding different way to run our restaurants. Ultimately the learning we continue to have is that our volumes Shacks, righty we run Shacks on with a higher AUV in the 4 million range. We know that would be running Shacks in the 3 million range as we open more and more and getting those Shacks which have a higher labor cost percentage. Getting those to be more optimal than they are today is the projects that we are working on. But again we will only going to do that to the goal we have in sales first.

Okay, thank you.

Thank you, we will go next to Alex [indiscernible] with JP Morgan. Please go ahead.

Hi, thanks for the question. The first one is upon the fair work that was been enacted end of this month. Could you talk about what you are doing to prepare an event for this fall and final perhaps in your [indiscernible] so over the line influenced here that you could apply to the rest of your system?

Yeah, okay fair work week you know we are at the win on the city on this. We don't know exactly all the rules. As we understand it best, the city is right now with city council trying to write those rules and figure how exactly how that should work. We generally understand that it's heavily penalizing for schedule changes within two weeks of the schedule. So we have got a lot of work to do, look we've always taking care of our team. We post schedules, we really make changes, but these things are different. This takes away without the flexibility of restaurant operators, opportunity to be more nimble with the payroll from time to time. So we have got a lot to think about. We are waiting on that. We expect it next month as the last communication we have heard, but there may or may not get pushed out. So we will see and we hardly waiting to see how this is going to be handled, but it's significant. With somebody shops in New York, when this hits it will be new cost for us and it will be a new area we have to manage and we will just keep cheering when we move to Seattle, next year there is a similar legislation that exists there. And we will grabble at that then. It's not going to stop us from going to high labor markets. We like high labor markets as they generally mean high sales that may impact our Op profit and we will keep you focused on that but we have got a lot of work to do as operators to optimize this opportunity.

Yeah, I appreciate the color. Thank you and then the second question is on your yester place opening. For that unit or even units similar to that in the future are you targeting the difference store AUV or margin for these units that might differ from your traditional economic model. Thanks.

It's too early to say. AUV really depends on the location. Obviously we hope with the some other step that we can improve some throughput, but overtime we remember we are starting people at $15 an hour. So our hope and our plan is to get the use AUVs in our profits in a similar range as they are today while payroll increase so up dramatically. So it is one of our strategies to offset, but again we got one Shack, you know we will plan yet for a second Shack. We are going to look at it, it's a way too early to really understand how it is working just yet. What I could tell you is many times I stood there myself and watched it's happening and talked to guest as it happen. You will like it. We are getting a lot of favorable feedback. Our operators like - this is allows our team, you spend their time on hospitality, it's that of the technical stuff and working in the kitchen. So it's working so far, we will keep diverse.

All right great that's a beautiful location. I appreciate the questions. Take care.

[Operator Instructions] We will take our next question from John Glass with Morgan Stanley.

Thanks very much, I would also like to thank you for all the detail both from the presentation as well as your outlook for '18. I'm though trying to make sense of it just bit of high level understanding A1 to give guidance until next quarter, but directionally you see a Euro margins are definitively going down, maybe to a create magnitude, and at least cost like G&A which maybe was depended on sales and other things you can't necessarily predict. Can you give us sort of what if magnitude have increased that you expect given all the things that are changing.

Hey, John, it's a bit too early to give you an outlook of magnitude. And as I said we will give you in our full guidance over in February this point when it comes to G&A and it comes to the system and operational support systems upgrades obviously talking about is really just in its early stage as it's kind of discovery and assessment. As I mentioned in my prepared remarks yes, you shouldn't assume G&A will go up next year. It could go up quite significantly as we look to really scale these to make sure that they're habitually robust to take advantage of this great opportunity. We also as I mentioned, we have the retreat for managers and for our leaders and we have one probably three years. We're leading into our new office that Randy touched on and so generally speaking across the board it is inherit investments. And then sort of normal course of business within the Shacks and we just touched on it at relative length, labor will continue to go up. So I think, clearly there will be margin pressure next year as a result of these things, but sure that we'll give you more color - as much color in January and February.

And then on the economics that you provided for new stores, that's sort of hypothetical. That is the same I believe that's what you sort of talked about two or three years ago for IPO process and I would have thought just given the success and maybe more refinement some of those numbers would have changed and maybe you can just talk about and maybe this is repeating old question asked earlier, but just is the class of '17 well above that range, is the '16 and '17 that we haven't been able to see the comp base still well above the $2.8 million to $3.2 million range?

Yeah, John, great question. Yes, they are both in '16 and '17, obviously we're clearly proud that we have over the last few years, since the IPO, greatly outperformed these metrics. So what we're trying to do on that slide is illustrative work at how good the returns of this business are at those metrics at that $3 million Shack. So clearly when you look back we've outperformed that in nearly way and we've had some tremendous from year one and long term cash and cash returns and free cash flow. So what we want to do here is say, as we look at these and we - look we will have a lot of $3 million Shacks, we have many now. As we open more and more scale, we expect a lot more of them, only on that slide is to just say, they're really good business.

I think it's also important to note, I mean this slide is illustrated, it helps us to continue to tell the story of Ran has done. So as I say, this is a business started in New York with super high LED's to have enough profitability and that was super high cash and cash returns and you can see that. This is only for 2016 fiscal results on the left hand side. As we talk about accelerating unit openings, the impact of that has - that impact are current year fiscal, right, in terms of creating an intensive partial year of Shacks sales of which the full income relates. However, when you look at these cash and cash returns, clearly even if it's a break on your current fiscal, it makes a kind of sense to do because even in a projected unit metric model of 2.8 million to 3 million, you're still talking about 34% of illustrated cash and cash returns. So there's also a lot between the left hand side and the right hand side of this chart, between a 5 and 2.8 to 3.2 and as Randy said, we've got every clustered as they have and this is in AUV. It's not suddenly going to adding 2.8 or 3.2, but that's a lot in between.

Okay, last one I promise. Your domestic company average as per region is very helpful as well. Your Midwest returns or cash in the door is so much higher than most other regions outside of New York; you would think that would skew your development to that region, right just as that -

Well, we're doing more John. I think development is to be done. That's really good news, but last week we opened another one in Troy, just outside the Troy. We had a tremendous start earlier this year in Detroit, so we opened in Troy and that suburb in St. Louis and there are quite a few. So it's a very small market today, only seven Shacks in that Midwest market. So we absolutely intend a growth.

Got it, thank you.

As there are no further questions at this time I'd like to turn the conference back over to management for any additional or closing comments at this time.

Thanks, I'll close. Just want to say, I just got back last night. I had a great opportunity to be with our team in the Middle East. We had a trip with our international partners to Kuwait, Abu Dhabi and Dubai and saw about 20 Shake Shacks in the last week. It just reminded how hard our teams work around the globe, how great that region is even though it has struggled as a region, but we have a lot of confidence in our opportunity with our partners there and beyond. And just wanted to note that how exciting and amazing it is to us and in 2011 we opened our first international Shack in Dubai, where we had under ten Shacks and today we have 33 just in Middle East alone, so pretty exciting time. I wanted to say thanks to our teams abroad and at home. And thanks everyone for taking the time to be with us on the call. We appreciate it.

Ladies and gentlemen, this does conclude today's conference. We thank you for your participation. You may now disconnect.