Shake Shack Inc. (SHAK) Q4 2018 Earnings Report, Transcript and Summary

Good evening, and welcome to Shake Shack's Fourth Quarter 2018 Earnings Conference Call and Webcast. At this time, all participants have been placed in a listen-only mode and the lines will be opened for questions following the presentation. [Operator Instructions]. It is now my pleasure to turn the floor over to Leo Rhodes, Vice President of Finance and Investor Relations. You may begin, sir.

Thank you, Martha, and good evening, everyone. Joining me for Shake Shack conference call is our CEO, Randy Garutti; and CFO, Tara Comonte. During today's call, we will discuss non-GAAP financial measures, which we believe will 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 our supplemental materials. Some of today’s statements may be forward-looking and actual results may differ materially due to a number of risks and uncertainties, including those discussed in our Risk Factors section of the annual report on Form 10-K filed today, February 25, 2019. 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. By now, you should have access to our fourth quarter 2018 earnings release, which can be found at investor.shakeshack.com, in the news section. Additionally, we have posted fourth quarter 2018 supplemental earnings materials, which can be found in the Events & Presentations section on our site or as an exhibit to our 8-K for the quarter. I will now turn the call over to Randy.

Thanks, Leo, and good evening, everyone. We ended 2018 with a strong fourth quarter capping off another tremendous year of growth here at Shake Shack. 2018 was by far our most ambitious year yet. We opened 49 restaurants; 34 company-operated and 15 licensed operating across 27 states and 13 countries. Our team put forth an incredible collective effort in the fourth quarter opening 17 company-operated and three licensed Shacks with seven of those opening in the last two weeks of the year. We grew total revenue in '18 by 28% to $459 million. We earned adjusted EBITDA of $73.9 million representing more than 14% growth from 2017 and delivered positive same-Shack sales just over 1%. In the fourth quarter, we posted same-Shack sales of 2.3% and reported our strongest traffic numbers in 10 quarters returning to nearly flat. As we celebrate Shake Shack’s 15th birthday this coming summer, I’d like to take a moment to reflect on how far we’ve come. A few weeks ago, when I was meeting with a group of our Shack leaders, I shared a memory from 2004. As we closed our doors on a busy day at the original and only Shack at the time at Madison Square Park, we achieved something unthinkable, our first $5,000 day. I remember how excited we all felt that day; a bunch of fine dining leaders and a hard working crew reaching $5,000 of sales of hot dogs, burgers, shakes and fries. Fast forward to the time of our IPO, when we exited 2014 with nearly $120 million in total revenue. In this past quarter, Shake Shack delivered our first ever $2 million day, and in four years, we’ve increased revenue by nearly 300%. I mention all of this as a reminder to ourselves where we started, and I thank and celebrate our team of over 6,000 people for all their hard work that it took to get us where we are today. As we maintain our long-term target to deliver $700 million of total revenue by the end of 2020, we expect to grow yet another 50% in just two short years and we are just getting started. I want to share with you our strategic commitments and key focus areas for this year in 2019. Our first and most important commitment remains to develop excellence in our people. Last year, we created nearly 2,000 new jobs, but what we’re equally if not even more proud of, are the 1,100 plus promotions within our teams, the ability to grow, develop, and progress is an important part of our culture, and the opportunity here at Shake Shack and these results give us continued confidence that we’re delivering on that promise. A specific area of focus for us this year is the important investment in the compensation incentive plan for our general managers. Our in-Shack leaders are critical to our continued success and ongoing growth and we’re committed to ensuring they benefit from that growth in as many ways as possible. To that end, we’ll be evolving and enriching our GM incentive plan to increase and align bonus potential even more closely to our performance targets. We’re particularly pleased to be issuing additional equity awards of $10,000 to each Shack GM. We believe we’re rewarding those critical leaders within our organization and ensuring they feel real ownership and participate in our collective future. Our second strategic commitment; to deliver a consistently great guest experience regardless of how our guests choose to get their Shack. 2018 represented another strong class of Shacks with eight new major markets including Denver, Charlotte, Seattle, Palo Alto and more. We were thrilled in Palo Alto to be able to bring Shack to loyal fans and thousands of new guests. With over 80% of our Shacks now located outside of New York City, this brand has proven itself nationally, and we’re excited for the further expansion that lies ahead both in and outside of our home city. 2019 promises to be our biggest class yet, 36 to 40 new company-operated Shacks. We’ll be continuing to roll out with a multi-format real estate strategy. The proportion of development in existing versus new markets will increase slightly in 2019 to approximately 80% to 85% existing markets as we focus on the efficiencies we can leverage as we deepen our roots in established areas. As for new markets among others, we’re excited to be entering Salt Lake City, New Orleans and Columbus for the first time. We began nearly 15 years ago as a burger joint in a city park, but 2018 saw the continued evolution of that original format into a varied portfolio of Shacks from urban high streets to free-standing pad, premiere shopping destinations in cities, big and small. We opened our first premium Food Court Shack in Aventura Mall in Miami, a format we’re really pleased with and plan to grow more of. We’ve even started rolling two Shack trucks in New Jersey and Atlanta to bring the flavors of Shake Shack to new fans in locations and events, big and small. In fact, first booking for the Atlanta truck was serving Maroon 5 after the Super Bowl, so we’re off to a pretty good start. None of this would be possible without the leadership of Andrew McCaughan who oversees all of Shake Shack’s development and was recently announced has been promoted to Chief Development Officer. Andrew began at Shake Shack when we had just three Shacks. He and his team are responsible for the incredible real estate selection, design, and construction that makes each and every Shack so unique and special. I’m thrilled for Andrew to increase his reach and impact across our company in his new and well earned leadership role. Internationally, we continue to expand and build out our business, the largest focus being in Asia. Launching in Hong Kong midyear was an extraordinary event. We now have two thriving Shacks in premier locations with more to come in Hong Kong and Macau. Japan has also grown into a strong and increasingly mature market with 12 Shacks to date. We’ll be expanding deeper this year into Osaka and entering Kyoto for the first time in 2019. South Korea has produced seven incredible Shacks and is poised for further expansion this year, albeit still going through some of their post honeymoon settling in period. And our more established businesses in the Middle East and the UK continue to be a critical part of our international footprint with both markets facing a little bit more region-specific macroeconomic pressure than other parts of our international portfolio. A few weeks ago I had the great pleasure of working with our team in Shanghai where we recently opened our first Mainland China Shake Shack. It’s impossible to find the words to describe this opening. The hard work of so many Shack leaders over so many years, the hospitality of our new friends and partners in China, our dedicated U.S., Hong Kong, and Shanghai team members, and the sheer enormity of the legions of fans welcoming us with open arms. As one of the largest and fastest developing cities in the world, Shanghai represents an important and notable milestone for us in our international expansion. This is the beginning of the first chapter of our story in Mainland China, the world’s most populous country, and a market where we see incredible opportunity for our brand in Shanghai and beyond. Outside of China, our development pipeline is robust and 2019 will be a busy year with our largest number of new international market entries to date. With new partners in Singapore, the Philippines, and Mexico, our teams are preparing for each of these important market launches this year. To further support this growth and due to the increasing importance of Asia to our business as a whole, we’ll be opening our first international office in Hong Kong this year and have permanent resources on the ground for the first time. Domestically, airports have increasingly become another part of our licensed strategy. Today, we have Shacks in 10 airports, seven here in the U.S. and three internationally. And for several years of successfully operating at JFK, over the past few months we’ve opened airport locations at DFW, Phoenix Sky Harbor and LaGuardia and I believe there is significant ongoing opportunity for growth in the airport space. We’ll also continue to grow our stadium business which has proven to be a great brand builder for us with the opening of Citizen Bank Park in Philadelphia for this upcoming major league baseball season. We’re really proud of everything we’ve achieved in our licensed business to-date and I want to take a moment to thank and celebrate Michael Kark who oversees this part of our business and was recently promoted to Chief Global Licensing Officer. Michael has led our international business since our first Shack in Dubai and has built an incredible team, established pivotal partnerships and developed an organization which has and will continue to build our business around the globe. We are bullish on our licensing business growth. And in '19, we expect to open between 16 and 18 net new licensed Shacks bringing us to roughly 40%-60% split of licensing company-operated Shacks around the world. Moving on to our next critical strategic focus this year, to cultivate a loyal and connected community. One of the most incredible things about Shake Shack is the size, passion and engagement of a community that’s grown around us over the last 15 years. I still marvel at seeing 1,200 people line up on opening day at Palo Alto last year and the patience of our fans more than 7,000 miles away showed up for our recent opening at Shanghai. The loyalty and energy from this community is something we value enormously and never take for granted. We focus more than ever on developing even deeper relationships with our communities whether they’re in or around our Shacks or if it’s one of our many digital channels. It’s an exciting time for innovation of Shake Shack and we’re building a digital toolbox that allows us to connect and engage with our guests like never before. As digital and technology become foundational across all aspects of our business, we’re thrilled to welcome two new important leaders to the team. Jay Livingston recently joined us as our first ever Chief Marketing Officer and brings a wealth of experience at scaling large global brands while remaining a local favorite, as well as in high growth consumer facing early stage companies. Dave Harris has joined our team as our first ever Chief Information Officer. He comes with a breadth of experience across digital innovation and technology-enabled growth in large multiunit environments. We’re thrilled to welcome each of these key leaders to Shake Shack as we continue to strengthen our leadership team. We’re really excited about our innovation in the digital space. People back just two short years only way to get a Shack Burger was to stand in line, order with a cashier and wait for your buzzer to tell you when your Shack was ready. Since then, we significantly expanded a number of channels available to our guests incorporating greater levels of convenience throughout the Shack experience and placing more control in our guest’s hands. Today, we have five ways in which you can order your Shack; in person in a Shack, using a self-serve kiosk in a Shack, using our newly refresh mobile app, our recently launched Web ordering platform or via one of our pilots with delivery partners. As mentioned on our prior call, all this change in digital innovation isn’t always easy. Adding more channels can at times add operational complexity to our Shacks and we’re continuing to review to evolve our kitchens, our order pickup areas, our packaging to ensure a great Shack experience in an omni-channel world. One of the things that separate Shake Shack from other brands is our ability to collaborate great chefs and high profile consumer brand throughout the country. This year we launched strategic partnerships with brands like Bumble, Lyft, American Express and brought Shake Shack to music events at Coachella, even popped up in Aspen last month serving Shack in a yurt in the St. Regis Hotel while teaming up with our pals from Eleven Madison Park. Shake Shack continues to be celebrated extensively by high profile celebrities, influencers extending our brand way beyond what’s typical for a company of our size. Expect to see us continue to create those rare and special occasions that brought awareness and create buzz and loyalty. And finally, we believe we must always be innovating our business for long-term growth. Innovation at Shake Shack is as much a mindset as anything else accepting that there is finish line and that change is a constant and a positive for all of us. The technology enabling consumers and business alike such significant levels, no strategy is finite in doing things differently to how they’ve been done before. That’s always been a core part of our culture at Shake Shack. We continue to embrace the challenge of constant innovation as a key part of how we successfully grow our business. And with that, we’re investing meaningfully in our systems for the future. Tara will provide an update on enterprise systems upgrade we referred to as Project Concrete, but I would like to take a moment to stress how important we believe this transformation will be in an effort to ensure our infrastructure and support systems are sufficiently robust and scalable to deliver upon our current and future growth opportunities. We’re investing a lot of capital in order to streamline and automate business process, all the while taking administrative and time consuming task out of the Shacks to better allow for our team to focus on delivering the highest quality experience. 2019 will remain a busy year for menu innovation at Shake Shack. We plan to focus on items that we believe will have the biggest impact allowing our teams to prioritize operational excellence in guest experience. We’ve moved to a monthly shake program, which we’re hopeful will keep our guests excited year round as we vary our flavors with increased frequency. In January, we served a delicious Tiramisu Shake and in February we’re serving salted vanilla coffee, coffee shake. We launched Chick'n Bites as an LTO at the West Village Shack in September and we’re rolling it out to all Shacks this quarter. Chick'n Bites are now available either as a six or 10-piece item and are made from all light meat, hormone and antibiotic-free, cooked sous vide and then hand-breaded order and crisp fry served with your choice of our Shack honey mustard, barbecue, shack sauce or cheese sauce. This is an LTO and we’re looking forward to seeing how our guests respond. In 2018, we made an agreement to new local burgers and our team market launches at Seattle and Palo Alto. For example, in Seattle, we teamed up with well-known local suppliers, a local bakery for bun, a local cheese as our topping and grass-fed only Washington State beef for our Montlake Double Cut burger. Working on these truly specific Shack local items continues to demonstrate another one of our core beliefs; the bigger we get, the smaller we have to act. We have another exciting slate of collabs and partnerships lined up for 2019, so stay tuned on that front. In the third quarter, our Innovation Kitchen open beneath our West Village Shack and new home office, and in its short tenure, the Innovation Kitchen has created a number of new items from cold brew floats, Mexican spice Hot Chocolate, Wintergreen Salad topped with our chicken nuts led by our new Executive Chef, John Karangis, we’re really excited about the opportunity that Innovation Kitchen will bring in the coming years. Now to wrap up my initial remarks, I want to remind everyone on the call, our commitment to Stand for Something Good in all that we do. This mission encompasses everything from working with local farm coalitions to ensuring family farmers have sustainable access to markets, to removing plastic straws from our restaurants, to sourcing real ingredients, hormone and antibiotic-free proteins and removing high fructose corn syrup from nearly all of our food, to supporting our team members in great times of need. You’ll continue to see uptick on initiatives that we believe are core to our company and resonate with our employees, guests, communities and suppliers. With that, I’ll turn the call over to Tara to share more fully how we ended the year financially and highlights of our growth ahead.

Thanks, Randy. Total revenue for the fourth quarter of 2018, which includes sales from both company-operated Shacks as well as licensing revenue, increased 29% to $124.3 million. Sales from our company-operated Shacks increased 30% to $120.7 million largely due to the addition of 34 new domestic company-operated Shacks since the fourth quarter of 2017 and positive same-Shack sales. Licensing revenue for the fourth quarter increased 18% to $3.5 million driven by a net increase of 15 Shacks since the fourth quarter last year and strong performance of our newer Shacks in Hong Kong and Japan. Implementation of the new revenue accounting standards at the beginning of 2018 has impacted the timing of the revenue recognition to some of our licensing agreements and we’ve included a comparison in the footnotes of the 10-K to show our revenue as reported under both the new and old standards. The impact on the fourth quarter and fiscal 2018 was $263,000 and $658,000, respectively, which was slightly above previous expectations due to the accounting treatment for our new partnership agreements with Mexico, Singapore and the Philippines in the back half of the year. For the full year 2018, total revenue increased 28% to $459.3 million with system-wide sales increasing to $671.9 million. In November, we raised our total revenue guidance and are pleased to have exceeded that primarily driven by the strength of our most recent opening and same-Shack sales performance in the fourth quarter. We opened 17 domestic company-operated Shacks in Q4 representing 50% of our 2018 opening schedule. Additionally, seven of the 17 Shacks opened in the last two weeks of the year and therefore is still in their very early days of operations which will impact near-term profitability as they work through their settling in period. We delivered positive same-Shack sales of 2.3% during the fourth quarter consisting of a 2.6% increase in price and mix, partially offset by 0.3% decrease in traffic lapping a 0.8% increase in same-Shack sales in the same quarter in 2017. This fourth quarter performance resulted in positive same-Shack sales of 1% for the full year 2018 at the high end of our previously guided range of 0% to 1%. Although we lapped the first full quarter of delivery testing which started in earnest in the fourth quarter 2017, our digital channels and delivery in particular performed strongly in quarter four and had a meaningful contribution to our opening revenue and cost wallet. In addition, we saw favorable weather in the Northeast over the holiday period in particular. As a reminder, New York City and the Northeast continue to represent the majority of Shacks and revenue in our comp base and as such, our comp performance will continue to be impacted to some degree by factors specific to these regions. Average weekly sales for domestic company-operated Shacks was $81,000 for the fourth quarter, a decline of roughly 4.7% from the prior year driven by the introduction of a broader range of unit volume Shacks into the system. Average unit volume for all domestic company-operated Shacks was $4.4 million for the full year. This is higher than our previously guided range of 4.2 million to 4.3 million due both to the continued strength of the 2018 class and our overall cost base performance. Shack-level operating profit, a non-GAAP measure, for the fourth quarter increased to $27.2 million and Shack-level operating margin was 22.5%. For the full year 2018, Shack-level operating profit grew 22.3% to $112.9 million with Shack-level operating margin of 25.3% performing at the higher end of our guided range. Shack-level operating margin in the fourth quarter was impacted by a few items. In particular, the backend weighted opening schedule and the cost of increasing levels of delivery revenue. Labor and related expenses increased 160 basis points to 28.5% compared to last year driven by those 24 new Shack openings in the second half of the year together with the ongoing impact of year-on-year wage inflation and regulatory requirements on our existing Shack. We’ve previously shared that new Shacks typically see a higher labor rate during the initial operating period as new teams calibrate staffing levels to support demand before the Shack settles into a more normalized operating rhythm. With 50% of our 2018 class opening in the fourth quarter, we certainly saw that impact our operating margin in the period. In addition, as illustrated on Page 12 in our supplemental material, the significant headwinds around labor cost continue with double-digit minimum wage increases in many of our markets, an incredibly competitive labor environment and increasing levels of regulation across the country. Other operating expenses in the fourth quarter increased 140 basis points to 12.6% compared to the prior year driven primarily by delivery commissions paid during the quarter that did not exist in the same period last year. Occupancy and related expenses declined 50 basis points compared to the same period in 2017 to 7.5% of Shack sales driven by sales leverage combined with an increase in the proportion of build-to-suit Shacks within the portfolio. Our occupancy line in particular will be impacted in 2019 with the recent change in lease accounting which I’ll discuss in a moment. Core G&A, excluding Project Concrete, another one-time item, was $14.4 million in the fourth quarter with the year-on-year increase driven by ongoing future focused growth investment primarily in people resources, home office expenses and technology and foundational infrastructure. Total G&A in the quarter was $15.2 million and included approximately 750,000, a one-time operating cost primarily associated with Project Concrete. As a reminder, the accounting standard released in August 2018 changed the treatment of implementation cost associated with client-based software solutions. In line with this, for the full year 2018 we spent approximately $1.3 million in one-time operating expense and approximately $1.1 million in capsule on Project Concrete. At a combined $2.4 million, this was slightly below our prior guidance of 2.5 million on Project Concrete in 2018 as a result of timing of spend between the fourth quarter of 2018 and the first quarter this year. Preopening expenses in the fourth quarter was $4.2 million and for the full year $12.3 million, albeit slightly below prior guidance of $13 million due to the timing of openings. This represents an increase of 60% and 28% from the prior fourth quarter and full year 2017, respectively, as we opened our largest class of Shacks to-date. Adjusted EBITDA in the fourth quarter declined 3% from the same quarter last year to $14.5 million and adjusted EBITDA margin was 11.6%. The fourth quarter results were impacted by each of the factors I’ve just mentioned. The increase in preopening costs relating to 17 openings are heavily backend weighted opening schedule impacting near-term operating margin, new costs occurring within the business related to delivering as well as our ongoing investments and continued growth. For the full year, adjusted EBITDA increased 14.2% to $73.9 million with an adjusted EBITDA margin of 16.1%. In the fourth quarter on an adjusted pro forma basis, we had $2.4 million or $0.06 per fully exchanged and diluted share compared to $3.9 million or $0.10 in the same quarter last year. Excess tax benefits and stock compensation activity had no impact on results. On an adjusted pro forma basis for the full year, net income increased 28% to $26.9 million or $0.71 per fully exchanged and diluted share compared to $21 million or $0.57 in the prior year. Included within these full year pro forma results is a tax benefit of $0.05 per fully exchanged and diluted share due to stock-based comp activities. Moving on to 2019, I’d like to provide some additional commentary on the new lease accounting standard that went into effect at the beginning of this year and the impact it will have on how we report our leases going forward and our results in balance sheet and P&L. We’ve also included some information as it relates to this on Page 13 and 14 of our supplemental materials. At the end of fiscal 2018, approximately 16% of our Shacks were build-to-suit leases and 84% were operating leases. Under the new standard, all of our existing build-to-suit leases will be considered operating leases and as a result of adoption we will derecognize all of the existing build-to-suite assets and liabilities on the balance sheet. We will then account for all operating leases on the balance sheet going forward and we expect the resulting net increase to total assets upon adoption to be in the range of $207 million to $217 million and the net increase to total liabilities to be in the range of $202 million to $212 million. From a P&L perspective, there’s no material change to the accounting for our existing operating leases. However, the accounting treatment for previous build-to-suit leases will have an impact on a number of key expense lines primarily occupancy where expenses of build-to-suit leases will now be reported. The expenses relating to these leases were previously accounted for in depreciation and interest expense. In addition, the treatment of some of our Shack equipment leases will result in a small benefit to other operating expenses. But on a combined basis, the impact of this new accounting standard is expected to have an unfavorable impact of approximately 50 basis points to our Shack level operating profit margin in 2019 and have been incorporated in our guidance for the year. While this change will increase our balance sheet and unfavorably impact our Shack level operating profit and adjusted EBITDA, it is non-cash in nature expected to be net neutral to net income and not a reflection of any change in underlying business performance. So moving on to guidance for the fiscal year 2019 and incorporating the impacts I just mentioned, we’re expecting total revenue of $570 million to $576 million, an increase of approximately 25% over 2018 representing another year of strong growth ahead. Within this total revenue number, we expect $15 million to $16 million of licensing revenue, an increase of approximately 13% to the midpoint over 2018. We expect to open 36 to 40 new domestic company-operated Shacks representing a unit growth rate of approximately 30%. We do, however, expect a similarly back weighted development schedule in 2019 as we experienced in 2018 with approximately 60% of our openings at this point scheduled for the second half of the year. As noted for the fourth quarter 2018, this significant growth comes with near-term investments and can have a meaningful impact at our Shack level profitability. This has been taken into consideration in our guidance for the year. We expect to open 16 to 18 net new licensed Shacks with our domestic licensed development focused primarily in airports and internationally continuing our focus on expansion into Asia, including our upcoming entry in Singapore and the Philippines as well as entry into Mexico later this year. At the end of 2019, we expect our average unit volume for all company-operated Shacks to be between $4 million and $4.1 million. Combined with the fact that we will continue to open Shacks at lower AUVs, this guidance also reflects our expectation that some of our sophomore Shacks are experiencing strong honeymoon periods in 2019 and will start settling into more normalized levels of sales performance. We expect same-Shack sales to continue to be impacted by our ongoing market growth strategy, particularly at this early stage in our overall expansion. To that end, we’re guiding to 0% to 1% same-Shack sales for the full year consistent with 2018. And this includes roughly 1.5% price taken on a blended basis in late December 2018 partially offset by the expected continuation of traffic trends experienced over the last 8 to 10 quarters. We expect the Shack level operating profit margin between 23% and 24% driven by four major factors; the new lease accounting standard which is expected to have a negative impact of approximately 50 basis points, food and paper cost increases driven by an increased usage of cost – increase usage and cost of paper and packaging as our additional sales continue to represent a higher proportion of our business and broader inflation in transport and distribution costs, labor headwinds continuing to trend we had experienced over the last couple of years with significant mandatory increases in both minimum wages and salaries in many of our key markets, higher wages overall as a result of the competitive and low unemployment labor market and the ongoing impact of new Shacks at a high percentage growth rate entering the system. As illustrated in our supplemental materials, our home markets of New York City, for example, has experienced a 43% increase in minimum wage since 2016 with other key growth markets experiencing between 20% and 30% increases in the same period. In addition, within the labor line, stock comp expense within Shack level operating profit will increase in 2019 as a result of the general manager equity growth that Randy mentioned earlier. In addition, the impact of the lease standard on our occupancy line, as a reminder, we also benefitted from a favorable 20 basis point impact from a non-cash deferred rent adjustment in 2018 which will not recur in 2019. We expect our G&A expense to be between $66.4 million and $68.2 million inclusive of equity-based compensation, Project Concrete and other one-time charges. At only 125 company-operated Shacks today, as you heard from Randy, we intend to continue to invest across our business to support the sizable growth that lies ahead. We believe in building the right way for the long term and you should expect to see us continue to deploy spend in our people, in our guest experience and in our underlying technology that we believe will deliver both leverage and compelling long-term returns for our shareholders. Randy mentioned our continued commitment to excellence in our people. In addition to strengthening our leadership team with exciting new members, we’ve also renewed several other key leaders’ long-term incentive packages as we rapidly approach five years since the IPO. As a result, our stock compensation expense in 2019 will increase compared to last year. We expect equity-based compensation to be between $7.4 million and $7.7 million in 2019, an increase of approximately 26% to the midpoint of the range. We feel really good with the structure we’ve put in place both as it relates to long-term retention and incentive alignment for continued performance delivery. Given the expensing of our original IPO options rolls off in the first quarter next year, however, we do expect to see leverage on this line item in 2020. Project Concrete, our enterprise system upgrade, is progressing well. We’re in the midst of development and implementation work and we’re on track for multiple key modules going live during the third and fourth quarters. The one-time incremental costs related to this project remain in line with our prior estimate and for 2019 are expected to be between $3 million and $3.5 million of G&A and approximately $4 million of capital, although the split between CapEx and OpEx may vary a little as the year progresses. The majority of this spend is expected to be one-time in nature and we’ll continue to report it separately on such throughout the year. As a reminder, Project Concrete in 2019 includes the majority of our financial, HR and procurement and inventory systems and represents a significant strengthening of our foundational infrastructure to further enable the many years of growth we see ahead. We expect preopening costs to between $13 million and $14 million for the year tied closely to our development schedule. As we’ve seen for many years, our Shacks often begin with extraordinary sales volume and we believe it’s important to continue to invest in ensuring these strong starts. Over the next few years as we continue to grow established markets, we do expect leverage on a per Shack basis in this line item. We expect depreciation in 2019 of approximately $41 million to $42 million. This represents more than 40% step up from 2018 at the midpoint with the most significant increase the result of a full year of depreciation for 2018 Shack opening combined with more new Shacks than ever coming online in 2018. The step up in depreciation mirrors our continued high percentage growth rate and although non-cash will have a meaningful impact to our 2019 EPS. We expect interest expense to be significantly lower than in years past between $300,000 and $400,000 primarily due to the new lease accounting standard and the resulting taxation of build-to-suit leases which previously recorded an interest charge. And lastly, we expect an annual adjusted pro forma effective tax rate of 26.5% to 27.5% for 2019, excluding any effect from the accounting treatment for our excess tax benefits from stock-based comp. We know many of you have asked about operating leverage in the business model and we carefully consider that as part of our annual and long-term planning process. Over the next few years, as we continue to execute on our robust pipeline of growth, fully implement Project Concrete and benefit more fully from current and ongoing additional investments, we do expect to achieve leverage in our overall cost base. While we’ve experienced significant increases in our labor cost as illustrated in our supplemental materials, we do expect those levels of inflation in some of our markets to begin to settle over the next few years. We continue our conservative approach to price taking only a modest increase which has not fully offset the increasing labor cost we faced. We do believe we retained pricing power and we’ll continue to assess relative to the headwinds operating margins as time goes on. From a G&A perspective, as you know, we accelerated investments in 2018 and we’ll do so again in 2019 as we continue to invest in long-term sustainable growth and build towards a much bigger business opportunity. Between Project Concrete and our other key digital marketing and tech initiatives, we’re confident in the returns they will deliver from the business in the future and the leverage they’ll drive in our P&L over the coming years. Overall, our business model remains one of the strongest in our industry. We have another incredible year ahead of us. We’re bullish about our opportunity to continue to grow Shake Shack for the long term. We have a stellar leadership team, a clear set of strategic priorities and a robust balance sheet of no debt resulting in our ability to continue to self-fund our ongoing investment and strategic growth initiatives from cash flow. With that, I’ll hand you back to Randy briefly before we open the call up to questions.

Thanks. Tara. I’m really proud of our team for the strong finish to 2018 marking another tremendous year of growth for Shake Shack. We’re going to continue to focus relentlessly on driving growth through excellence in our people, delivering a consistently great guest experience, cultivating a loyal and connected community and innovating our business for long-term growth. Looking forward, 2019 is another busy year as we take on our largest class of Shacks yet. We will begin to build and enter into three new countries internationally. We know there is significant runway for growth ahead and we’re building this company for a long and bright future making the necessary investments along the way to ensure we fully capture that opportunity as we head towards our target of at least 200 company-operated Shacks and 120 licensed Shacks and over 700 million in total revenue by the end of 2020. With that, thank you all for joining today’s call. And you can go ahead and open the line for questions. Thanks.

[Operator Instructions]. Our first question will come from Nicole Miller from Piper Jaffray.

Thank you. Good afternoon. I was wondering if you’d share a little bit more about the important changes you made at the executive level, the announcements that were made last week. Talk about if you can a little bit about growing talent internally and how you balance that against attracting external resources?

Thanks, Nicole. I’ve been working at this company for 19 years, and as Shake Shack has grown, one of the core principles I’ve had for our leadership team has been a balance, a balance of the people that got us here from the beginning and really understand what built this place. We have people from outside organizations who bring expertise and experience that we haven’t had before. If you look at our executive leadership team, our full leadership team and even our teams all the way through the Shack level, they’re balanced teams, they are balanced, they’re diverse, and they bring different kinds of thought. So we’re really thrilled to bring in Jay and Dave to really for the first time have Chief Marketing Officer and Chief Information Officer. And we’re thrilled to promote Andrew and Michael to really lead our development. They’ve seen this place since the beginning and they’ve done an incredible work in addition to Tara, Zach, Peggy, and our other leadership team. We’re also proud to announce a new board member Sumaiya Balbale who comes to us with a tremendous e-commerce background from Jet.com and most recently at Walmart.com to add to our board. So we’re really excited about how we lock arms around this table, the kind of battles, debates, and excitement that we go forward with as a leadership team. And the strategic focus that we talked a lot about earlier on this call has been birthed from that group of people, and we’re excited to execute it this year.

Thank you for that update and congratulations to all those individuals. Just a last question. When you talk about labor pressures and we run the model, we can see that that is as critical or much as an impact that you’re talking about. I wanted to understand a little bit more on the third piece, I think that you talked about, the new store, just the general inefficiencies with that, and it certainly -- the price of just doing business very effectively. But when does that start to level off? And if you could frame up the impact of that, that’d be very helpful I think as we model maybe not this year but years going forward? Thanks.

Thanks, Nicole. It’s a really important question and I really want people to hear it. If you look at – last year we grew 38% unit growth, okay. There is a cost to that growth. It does impact our Shack level operating profit over the near term. If you look at this business on a run rate basis, it’s very different than when you take these one-year snapshots that we obviously need to take in these quarters, in these years including our guidance for '19. So when you open restaurants, let’s talk about -- just to even name a few at the end of last year, Palo Alto, high labor market; some in LA balanced through some in New York, in Harlem here, throughout Texas. They’re really balanced in approach at all levels. As we’ve noted and in our supplemental materials, the majority of our markets where we are growing now are at high labor markets, and those impact the near term. It does take a little time for a Shack to get opened. As you know, we open with tremendous sales volumes. Those level off over time, but we have to invest in that. That comes in preopening costs, and it comes into the first few months of labor in any given Shack. And as we’ve proven time and time again, those then level off to tremendously profitable restaurants. But when we’re growing at the rate we are and another 30% this year in unit volume and again a revenue volume of 25%, we expect impact and that’s built into our guidance for this year. The important question I think is where does this go? Where does it end? And that’s something we talk a lot about. And I think we have tremendous confidence in our ability to level off some of that pressure over the coming years. But we’re not going to stop growth at the cost of near-term profitability. We believe in growth. We still have one of the strongest profitable business models in this industry, and we want to keep growing it even when we know it impacts over time. So yes, with this many restaurants being stuffed into the backend of the year last year, let me reiterate what Tara said, we had 17 of our 34 company-owned Shacks opened in the fourth quarter, seven of those in the last two weeks. That takes an investment. It has an impact and you saw that in our fourth quarter results. And you will see some version of that impact with similar growth into this year. I hope that answers the question for you.

It sure does. Thanks, again.

Our next question will come from Jake Bartlett with SunTrust.

Great. Thanks for taking the question. The first one, Randy, looking at the same-store sales, really accelerating very strongly, the best in over two years, you mentioned a couple of factors but how can we understand what drove that? Was it the delivery in the digital, perhaps Hot Chick’n doing really well or may be less cannibalization that you had cited last quarter? How do we understand you going from kind of negative to sharply positive so quickly?

Yes, the team did a really great job ending the year in the fourth quarter. I’d say there was a number of things that have gone our way. Really just focusing up on continuing to grow operations, some significant opportunity in the digital space, as you mentioned. We’ve continued to pilot with some of those delivery partners. That had some good impact on the fourth quarter, all those digital channels that we’ve continued to grow, we mentioned earlier, we opened up new channels with Web ordering. Those have been really good for us. Our operators really settling into how those digital channels work. A little bit of a better weather in the fourth quarter when accounted. And that was really the impact. So strong end to the year, we’re very proud of that. It put us on the higher end of our guidance, ending the year over 1% and that’s part of why we’re guiding to a similar ratio this year, 0% to 1% for our companies.

Got it. But when I think of those factors whether the digital what you already had started to lap in this quarter, you’ve kind of added the Chick'n Bites going forward and just trying to understand the guidance and whether that 0% to 1% I guess it is really your long-term guidance I think since your IPO. But is that really going to be your starting point every year or does that reflect something that we should be really cognizant of that might kind of pressure you below where you’ve kind of exited the year?

Well, Jake, look, we aim to – it’s not a quarter-by-quarter business for us, right. We set out with 0% to 1% at the beginning of the year. We saw some wins, some better quarters, some not as good quarters. When we look at the strategy for this year, we’re taking just over 1% -- about 1.5%. With the impact of 36 to 40 Shacks opening in 80% of those markets being our current market, we want to make sure we’re careful. We want to make sure we do what we say we’re going to do which is what we’ve done for many years here at Shake Shack. And consistent with last year, we think that’s a good number that allows our teams and our real estate team to focus on building great Shacks and all of the things we’ve talked about in previous quarters leading up to that 0% to 1%. But again, we’re real proud to end the year over that 1% bogey that we set and we think it’s a good start for this year. I can’t speak to future years. We’ll keep you posted on that.

Jake, just as a reminder, our home base still – you hear us say this every quarter, but our home base still represents about half the company which I think will continue to feed into how we feel about guiding to that number. It doesn’t represent the majority of the company yet and it won’t the foreseeable future. And in addition to that, it’s still pretty heavily dominated by these regions on the East Coast that we mentioned with the majority of both Shacks and revenues still being New York and the Northeast. So that feeds into it too. Until it becomes the majority of the company, it’s still not the number one metric we were looking at. We were thinking about how we go into a new region to achieve both top and bottom line growth.

Got it. I appreciate it. Thank you.

Next, we’ll take the question from Andrew Charles from Cowen and Company.

Great. Can you guys just – first housekeeping and my real question? Can you guys just quantify the impact from strategic cannibalization in the quarter I think in years past some of you guys were able to provide?

Hi, Andrew. What we’ve done in previous quarters is we’ve given you some examples of how we enter new markets and how we think about scaling top and bottom line growth and increasing market share. We have never – I don’t think really guided to or broken out what we think that strategy has done on a system-wide basis. It also would actually be really hard to come up with that number accurately. We look at it directionally. How much market share do we think there is to be gained in the market? How small are we today? And do we think that it’s the best place [indiscernible]. Did you hear that?

Just looking at the average weekly sales on a year-over-year basis, it looks like about a $400,000 gap between average weekly sales in both the quarter as well as the year when you compare the '18 reference period to the '17 reference period. You obviously see the outperformance 4Q '18 comps seem to outweigh the full year comps for 2018. I guess what are dynamics we should be considering on why the year-over-year decline in 4Q average weekly sales wasn’t more muted?

The biggest thing that’s impacting that line item will continue to be the case. Andrew, it’s the fact that we’re adding lower AUVs Shacks into the system.

And looking at 2018 why they finished so strong that new Shacks outperformed the comp in the fourth quarter was very strong obviously and I think those two things were really the impact of what kept it at that 4-4. And we had guided obviously below that. But we’re really proud of how the team finished up.

Yes.

Very good. Thanks, guys.

You’re welcome.

Our next question will come from John Glass with Morgan Stanley.

Thanks very much. First, can you just update us on what CapEx came out in 2018? And what you think about it, I didn’t see it in the guidance perhaps I missed it, for 2019. And I guess maybe the core of the question is, how have build cost changed in 2018? How do you project them to change in '19, particularly I don’t know if back loading has caused some inefficiencies in that or if you’ve gained efficiencies along the way, maybe an update on the build cost for the class of '18 and thoughts on '19?

Yes, John, as you know, we don’t guide to CapEx. We haven’t this year. And you’ll see all of the cash flow detail in our 10-K which we posted about half an hour or so ago. But I will say you aren’t seeing anything domestically different than you’ve seen in the past. The build cost is about $2.1 million to build the Shack. And of course that varies as it always has been. It can vary quite significantly in some cases. And that deployment of capital is something that we look at extremely carefully as we go through the diligence process of new market and new Shack openings. And I think that process is something that will continue into 2019.

Yes, with the largest class of Shacks ever in '18 and even more coming in '19 in addition to our board investments we’re making in Project Concrete, our new home office, the Innovation Kitchen, I think the story there, John, and maybe it’s what you’re getting at a little bit is obviously the depreciation is going to be a significant tick up and impact EPS next year. That’s something that we’ve called out on purpose because that’s an investment we want to and need to make. It’s a non-cash item but it’s important and caused us money to build these restaurants. Look, construction costs are going up in a lot of markets. Our team I think have done a really good job of getting more effective with our builds, building some of the best Shacks we’ve ever built while holding strong to kind of last couple of years of per Shack cost investment.

And then if I could just follow up. The delivery question once again, so it sounds like you got some benefit from delivery even as you lapped over delivery a year ago. And I don’t know if you would call it deliveries being a dominant factor in the comp increase or the less traffic decline that you experienced in past quarters. But is 2019 – so one, if you can quantify that to the extent you want to. Is 2019 the year you think you will commit to a system-wide rollout of delivery for whoever providers you chose? And you’ve called out the cost of commissions. Are you at the point where you think the economics do make sense? I know the execution may be a question, but do the economics make sense to levels you’re experiencing it right now?

So, John, a couple of things. For the most part, deliveries rolled out with various partners still under pilot with three to four major partners throughout '18. No change there. We’re not going to quantify that just yet other than saying digital channels in total which include delivery continue to increase and continue to show higher average check. That’s kind of the data we’re going to share at this point, all of that impacting the comp in the fourth quarter and our expectations for growth this year. So we’ll keep you posted as those things go. But for the most part, we’re very happy with the guest demand for delivery. We’ve got some new packaging that started about a month ago. So we’re working on some of the new things for just really better guest experience, better food safety and making sure we can do a better job in the Shacks for anyone, no matter how you’re getting your Shacks. So important thing, we’ll keep you posted on strategy and we expect to have a lot of focus on that and other things.

Okay. Thank you.

Jeffrey Bernstein from Barclays has our next question.

Great. Thank you very much. Two questions. Just one on the broader restaurant margin for '19. Looking back to '18, the restaurant margins were down it looks like 130 bips and I know you’re guidance for '19 is for at least that and I recognize that’s got the 50 basis point movement from lease accounting. But I was just wondering – obviously it’s significant pressures. I’m wondering bigger picture where you would draw the line in the sand and say, you know what, this business is going to achieve a certain level of margin and therefore whether it’s pricing greater than the 1.5 which I think you kind of alluded to maybe considering that further. But just wondering theoretically how you think about the restaurant margin and where you should draw a line in the sand that we shouldn’t fall below a certain level?

Hi, Jeff. It’s Tara. So yes, obviously these are all things that we’re looking at and you hit on some of the major ones for 2019. Obviously that lease standard accounting change is meaningful at 50 bips, albeit non-cash. We have continued to have lower AUV Shacks coming into the system which as you know impacts lot, because the lower sales tend to come with a lower operating profit or be still a very healthy one. We also see going into next year and we touched on it a little bit and you saw a little bit of it in the fourth quarter. But just the increasing proportion of that as really digital as a whole in the business just delivery being a part of it, it’s starting to impact things like paper packaging, as Randy’s mentioned as well, as well as commissions. And labor inflation, we touched on it leveling off. It hasn’t stopped yet. We’ve got pretty significant increases even in our home city going into next year with new – going into this year with new up at 15 and some mandatory salary increases too. But we did start – we’re going to start to see some of those really high double-digit increases start to level off. Over what time period, we haven’t quantified that publicly yet and some of it is not necessarily with something known. But we’re feeling good about just those really high levels of inflation beginning to just be a bit less acute as time goes on as well as we’re getting to deliver some leverage over time on some of our investments, whether it was in the Shack or as a result of some of those G&A investments that we’re putting into the business. So we’ll update you at some point to the extent that we decide to go out a bit further in some of our more detailed line items. For now obviously you’ve got our 2020 target on the top line. But just suffice it to say we still feel really, really good and really bullish about the return on capital for this business the long term and the key metrics top and bottom lines for the long term.

Jeff, I’ll just jump in and add. We talk a lot about the factors affecting us today and our communication really hasn’t changed since the IPO in the last four years, right. We’ve talked about many new Shacks being added over the long term in the low $3 million range at the low 20s our profits. That’s kind of the model we’ve said we would deliver. We’ve over-delivered on that for the last four years. That is the long-term model. So what we’re doing about those pressures that Tara talked about? There’s things like kiosks. There’s things like Project Concrete which will help our operations. There is hopefully the leveling off of some of the mandated changes that we’ve seen at more than double-digit increases every year for the last few years in our major markets. So it gives us a lot of confidence in the long-term strength of the business. And again, at the rate we’re opening I’ve said it a few times on this call, there is going to be some near-term impact. And we’ll take it year-by-year. We’ll keep you posted. We think it’s a pretty strong business model and continue to move forward.

And as you rightly said, we alluded to pricing and we continue to remain really conservative there and we think that’s the right thing to do as an early stage in our growth and as we think of entering new markets. But we feel pretty confident about the extent to which we would take pricing power should we need it.

Understood. And then secondarily, are there any concerns around – the labor inflation is obviously significant. Do you see any secondary selling? Is there any concerning signs in terms of turnover going up or quality or experience maybe coming down? How do you measure that or get comfortable that you’re still on the better end from a labor standpoint?

I think it’s similar to how it’s been for many years and albeit I’d say there’s probably more external pressure than there’s ever been, right. With low unemployment, increasing wages across the board, it’s challenging. And I’ve said that for years that that will be our number one challenge. If you heard me on the call, it is our number one focus. You see us making continued new investments in general managers and all of our managers, frankly. But that will be something I would imagine will be the number one challenge forever in our business. We’re in a people-led business. It’s also our sweet spot. It’s also what we do better than anyone and it’s how we’re going to continue to invest so that we have restaurants that are standing with great leaders decades from now. But it’s never going to be easy.

Thank you.

Our next question will come from John Ivankoe with JPMorgan.

Hi. Thank you. I think in fiscal '18 you said that your company U.S. volumes were $4.4 million but you’re guiding to 4 million to 4.1 million in '19 which obviously continues to be a decline relative to your comp which overall is expected but maybe the overall magnitude being a little bit greater. The question is, does overall average unit volumes as we think about '19 are influenced by the '17 class, the '18 class and the '19? Because you report comps for stores opened greater than 24 months, it’s not really easy for us or in fact it’s almost impossible for us to calculate a true new unit volume number on a 12-month basis. So the point of the question is when you guys look at your class of '17, class of '18, class of '19, are there kind of new unit volume ranges for each one of those years that we should be thinking about in terms of how those different store years will settle out over time? And I apologize if you’ve answered both [ph] questions.

In the past we’ve talked about sort of class year AUV and we’ve gone through this last couple of years to give you more of an end of – trailing 12 AUV and we think that’s better over the long term, understanding the challenge for you. We look at '19, just adding 36 to 40 more Shacks period at all kind of levels of sales with less new markets, those will generally have a lower AUV on average as we go forward over time with the bigger classes. We expect that. Also when we have big classes such as 2018, the sophomore Shacks coming into year two or some of those Shacks even that opened in late 2017 will be still in their honeymoon period. You looked back at the end of '17 we had restaurants like our first in San Diego, restaurants like our first in St. Louis, Danny Meyer’s hometown, we’ve had some Shacks that will start high and then hit their sophomore year and as we’ve talked about over time, those come down. Yes often our new Shack class starts higher. All of that understand it’s hard to model for you. It’s a little bit more of a balance that has led us to a slowly declining AUV for the last couple of years, something we’ve talked about. We’ve continued to share as an expectation for you and our shareholders and something we do think levels off again over time just like our profit margins. But – and sometimes it’s going to be challenging to forecast in a perfect way with 30% unit growth coming this year.

If I can ask – when we think about where they’ll settle out longer term, do we think about the '18 and the '19 class for example similar to '17? What I’m really asking Randy is not necessarily the forecast for how they’ll perform in '19, but if there were just kind of buckets in terms of thinking this is the $4 million type of class or 3.4 million type of class or 3 million type of class because you know better than anyone that the type of location, the square foot, whether it’s the first unit in the market or the third unit in the market, whatever it is, there’s so many different types of units that you guys are opening. Is there anything that you could say that a certain year is more representative of a certain type of unit that will have a certain type of average volume over time, or will '17, '18, '19 when we look in five years, for example, will there all be performing relatively similarly from an average unit volume perspective?

Yes, John, I certainly get the question. It’s not something we’re prepared to break out on a year-by-year basis right now. I’ll just say this. We ended the year with 124 company-operated Shacks, okay. 34 of those, there’s not a whole lot of company, so it’s very important we opened last year. Not a whole lot of companies with that kind of percentage growth. We understand it’s not the easiest thing for you to predict. I do think as Shacks get – as classes get bigger over these last few years, I think generally having broader range of volumes and a lower AUV, there may be examples like certain very, very strong Shacks we’ve opened since '17, '18 that popped that up or down. But I think the best way we can say it now is to try to give you that annual guide. I understand it’s not the best for you, but --

No, I got it. And by the way, thank you for that annual guidance. What you give is certainly helpful, but was just seeing if we could go one step further. On the same overall topic but a different direction, Randy, you mentioned in your prepared remarks I think you said 80% to 85% of new units in existing markets. And you discussed gaining some efficiencies based on that existing market penetration. Was that a qualitative comment, a quantitative comment and I hoping since you specifically called it out what we may actually gain and benefit as we think about that increased existing market penetration in '19 and '20?

Yes, thanks, John. I think it’s both quantitative and qualitative. Here’s how we view it. There’s absolutely learning that we’ve had as we’d gone to one-off markets that become two-off markets, it’s expensive for us from a human capital, G&A, a start up and distribution COGS line often to have one restaurant. This is not an example of particular numbers though. When you have one restaurant in Birmingham, Alabama or one in St. Louis or one in Nashville, those are examples of what we have. Those one-offs can – they don’t benefit as much as when we open six or seven in Los Angeles. So we think there is quantitative wins there and there’s certainly qualitative wins that come from our marketing team’s focus, from our operators team’s focus and our ability to double down on existing markets. So what I want to hear in that comment and in this response is we want to do that more often. I think what we’re going to do is keep that 80% to 85% existing market to give us that chance to double down a little more focus on those and probably do a couple of less one-off regions in this next couple of years. We’ll do some. There’s going to be some great ones. We’re doing Salt Lake City as I said, we’re doing New Orleans, we’re doing Columbus, Ohio, but we want to make sure that that can be covered with a great operator and can really build strong teams and then we can benefit from all the distribution and other efficiencies over time. So that’s more of a long-term play, as I mentioned, and that’s our strategy moving forward for right now.

Thank you.

Our next question will come from Karen Holthouse with Goldman Sachs.

Hi. Thanks for taking the question. Just a quick question about the 2018 guidance. So could you give us a sense of specifically what sort of commodity outlook is better than that? And then how are you thinking about your beef cost into next year? There are some leading indicators that that market is starting to get a little bit tighter, but I know given how you source, it’s not necessarily a one-to-one sort of regroup from some of the headline prices we might see?

Hi, Karen. So we’re not really guiding to COGS and when we gave you some directional color based on how we see it right now, our COGS labor, other OpEx is all baked within that 20 – baked into that 23% to 24% guidance, as I mentioned within COGS things that impact from the increase of delivery or expecting to as well as just broader inflation in the whole transport sector post job. And sorry, I missed the second part of your question. Was it on labor?

No. Within commodities just specifically any higher level commentary you’re willing to give about how you’re thinking about beef prices in 2019? There are certainly headline numbers we can see that would suggest the beef market is getting tighter. But I know just give how you source, it’s not necessarily a one-to-one sort of relationship between some of the headline commodity prices and your input costs?

Yes, absolutely. We’re not guiding to anything and specific on beef right now. And as you rightly point out and as you know, the cuts that we buy don’t necessarily would mirror what you see across the broader beef market. So to the extent that that changes and with any more specifics on beef or any other commodities, then we’ll update you as the year goes on.

Thank you.

That does conclude our question-and-answer session today. At this time, I’d like to turn the call back over to Randy Garutti for closing remarks.

Just want to say thanks to everyone who took time to listen to this call. We really appreciate it. We’re thankful for our team’s good work in 2018 and excited for what’s ahead. Thank you. Have a great night.

That does conclude our conference for today. Thank you for your participation.