What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-03 compared with 2023-08-04 · 241 added, 168 removed, 327 unchanged (56% of the section changed)

1 unchanged sentence

This section and other parts of this Quarterly Report on Form 10-Q ("Form 10-Q") contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"), which are subject to known and unknown risks, uncertainties and other important factors that may cause actual results to be materially different from the statements made herein.

All statements other than statements of historical fact are forward-looking statements.

All statements other than statements of historical fact are forward-looking statements including, but not limited to, statements about the Company's growth, strategic plan, and liquidity.

Forward-looking statements discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business.

3 unchanged sentences

You should evaluate all forward-looking statements made in this Form 10-Q in the context of the risks and uncertainties disclosed in our Annual Report on Form 10-K for the fiscal year ended December 28, 2022 ("2022 Form 10-K").

26 | Shake Shack Inc.

The forward-looking statements included in this Form 10-Q are made only as of the date hereof.

10 unchanged sentences

This commitment drives our integration into the local communities in which we operate and fosters a deep and lasting connection with our guests.

As of June 28, 2023, there were 471 Shacks in operation system-wide, of which 270 were domestic Company-operated Shacks, 35 were domestic licensed Shacks and 166 were international licensed Shacks.

The following definitions apply to these terms as used herein:

"Average weekly sales" is calculated by dividing total Shack sales by the number of operating weeks for all Shacks in operation during the period.

For Shacks that are not open for the entire period, fractional adjustments are made to the number of operating weeks open such that it corresponds to the period of associated sales.

"Same-Shack sales" represents Shack sales for the comparable Shack base, which is defined as the number of domestic Company-operated Shacks open for 24 full fiscal months or longer.

For consecutive days that Shacks were temporarily closed, the comparative period was also adjusted.

“System-wide sales” is an operating measure and consists of sales from the Company's domestic Company-operated Shacks, domestic licensed Shacks and international licensed Shacks.

The Company does not recognize the sales from licensed Shacks as revenue.

Of these amounts, revenue is limited to licensing revenue based on a percentage of sales from domestic and international licensed Shacks, as well as certain up-front fees, such as territory fees and opening fees.

As of September 27, 2023, there were 495 Shacks in operation system-wide, of which 280 were domestic Company-operated Shacks, 39 were domestic licensed Shacks and 176 were international licensed Shacks.

Recent Business Trends

Same-Shack sales for the thirteen weeks ended June 28, 2023 increased 3.0% compared to the same period last year, driven by a 4.3% increase in price mix and a 1.3% decrease in guest traffic.

Compared to the same period last year, suburban Shacks increased 3.5% and urban Shacks increased 2.5%.

Compared to the first quarter of 2023, same-Shack sales slowed with price mix offsetting negative guest traffic across urban and suburban Shacks during the thirteen weeks ended June 28, 2023.

For the purpose of calculating same-Shack sales growth for the thirteen weeks ended June 28, 2023, Shack sales for 197 Shacks were included in the comparable Shack base.

Same-Shack sales for the thirteen weeks ended September 27, 2023 increased 2.3% compared to the same period last year, driven by a 6.5% increase in price mix partially offset by a 4.2% decrease in guest traffic.

Compared to the same period last year, same-Shack sales at suburban Shacks increased 3.7% while urban Shacks increased 1.0%.

Same-Shack sales during the thirteen weeks ended September 27, 2023 slowed when compared to the thirteen weeks ended June 28, 2023, driven by decreased guest traffic across urban and suburban Shacks partially offset by price mix.

For the purpose of calculating same-Shack sales for the thirteen weeks ended September 27, 2023, Shack sales for 202 Shacks were included in the comparable Shack base.

Average weekly sales were $74,000 for the thirteen weeks ended September 27, 2023 compared to $73,000 in the same period last year, primarily driven by higher menu prices, partially offset by a decline in guest traffic.

Average weekly sales decreased 3.9%, compared to the thirteen weeks ended June 28, 2023, driven by a decline in guest traffic across all domestic Company-operated Shacks partially offset by price mix.

Shake Shack Inc.

Average weekly sales were $77,000 for the thirteen weeks ended June 28, 2023 compared to $76,000 in the same period last year primarily driven by higher menu prices.

Average weekly sales increased 5.5%, compared to the thirteen weeks ended March 29, 2023 driven by an increase in traffic across all domestic Company-operated shacks .

Shack system-wide sales for the thirteen weeks ended June 28, 2023 increased 21.2% to $426.3 million compared to the same period last year and increased 8.0% compared to the thirteen weeks ended March 29, 2023.

Digital sales for the thirteen weeks ended June 28, 2023 increased 3.4% to $86.9 million compared to the same period last year and decreased 3.0% compared to the thirteen weeks ended March 29, 2023.

Total digital sales includes orders placed on the Shake Shack app, website and third-party delivery platforms, which represented 33.2% of Shack sales during the thirteen weeks ended June 28, 2023.

Form 10-Q | 27

System-wide sales for the thirteen weeks ended September 27, 2023 increased 24.3% to $438.9 million compared to the same period last year and increased 2.9% compared to the thirteen weeks ended June 28, 2023.

Digital sales for the thirteen weeks ended September 27, 2023 increased 5.4% to $83.2 million compared to the same period last year and decreased 4.3% compared to the thirteen weeks ended June 28, 2023.

Total digital sales includes orders placed on the Shake Shack app, website and third-party delivery platforms, which represented 31.4% of Shack sales during the thirteen weeks ended September 27, 2023.

Development Highlights

During the second quarter of 2023, we opened 10 new domestic Company-operated Shacks and 13 new international licensed Shacks.

There was one permanent international licensed Shack closure in the second quarter of 2023.

During the third quarter of 2023, we opened 10 new domestic Company-operated Shacks, four new domestic licensed Shacks and 11 new international licensed Shacks.

There was one permanent international licensed Shack closure in the third quarter of 2023.

Location Type Opening Date

Bangkok, Thailand — centralwOrld International Licensed 3/30/2023

Busan, Korea — Centum City International Licensed 4/6/2023

Fuzhou, China — MixC International Licensed 4/8/2023

Qinhuangdao, China — Aranya International Licensed 4/22/2023

Portland, OR — West End Portland Domestic Company-operated 4/24/2023

Jersey City, NJ — Jersey City Domestic Company-operated 4/27/2023

London, United Kingdom — Camden International Licensed 4/27/2023

Gaithersburg, MD — Kentlands Domestic Company-operated 5/3/2023

Mexico City, Mexico — Miyana International Licensed 5/18/2023

Quezon City, Philippines — North Edsa International Licensed 5/19/2023

Lancaster, PA — Lancaster Domestic Company-operated 5/22/2023

Irvine, CA — Irvine Spectrum Domestic Company-operated 5/26/2023

London, United Kingdom — Clapham International Licensed 6/1/2023

Istanbul, Turkey — Lotus International Licensed 6/1/2023

Westlake, OH — Westlake Domestic Company-operated 6/5/2023

Wuhan, China — Tiandi International Licensed 6/10/2023

Richmond, PA — Willow Place Domestic Company-operated 6/12/2023

Kuwait City, Kuwait — Dahia International Licensed 6/12/2023

Chongqing, China — Chongqing MixC International Licensed 6/18/2023

Sugar Land, TX — Sugar Land Domestic Company-operated 6/22/2023

National City, CA — Westfield Plaza Bonita Domestic Company-operated 6/23/2023

Dubai, UAE — Al Barsha International Licensed 6/26/2023

McKinney, TX — McKinney Domestic Company-operated 6/28/2023

New Baltimore, NY — New Baltimore Travel Plaza Domestic Licensed 6/29/2023

Culver City, CA — Downtown Culver City Domestic Company-operated 7/5/2023

North Wales, PA — Montgomeryville Domestic Company-operated 7/6/2023

Los Angeles, CA — Koreatown Domestic Company-operated 7/12/2023

Guangzhou, China — Taikoo Hui International Licensed 7/15/2023

Al Ahmadi, Kuwait — Ahmadi Park International Licensed 7/16/2023

Paradise Island, Bahamas — Atlantis International Licensed 7/20/2023

Hong Kong, China — Metroplaza International Licensed 7/22/2023

Houston, TX — Katy Freeway Domestic Company-operated 7/25/2023

San Marcos, TX — San Marcos Domestic Company-operated 7/27/2023

Shanghai, China — Raffles City International Licensed 7/28/2023

Chengdu, China — MixC International Licensed 7/28/2023

Cranston, RI — Garden City Domestic Company-operated 8/8/2023

Oceanside, NY — Oceanside Domestic Company-operated 8/13/2023

Incheon, South Korea — Incheon International Airport (Terminal 1) International Licensed 8/14/2023

Al Ahmadi, Kuwait — The Warehouse Mall International Licensed 8/16/2023

Beijing, China — Livat International Licensed 8/19/2023

New York, NY — Lower East Side Domestic Company-operated 8/25/2023

Manila, Philippines — Araneta International Licensed 8/25/2023

Union, NJ — Whitney Houston Travel Area Domestic Licensed 8/30/2023

Lynnwood, WA — Alderwood Mall Domestic Company-operated 9/5/2023

Riverton, UT — Mountain View Village Domestic Company-operated 9/11/2023

Cherry Hill, NJ — Walt Whitman Travel Plaza Domestic Licensed 9/14/2023

East Brunswick, NJ — Joyce Kilmer Travel Plaza Domestic Licensed 9/22/2023

Hainan, China — Sanya International Licensed 9/23/2023

28 | Shake Shack Inc.

Form 10-Q | 27

RESULTS OF OPERATIONS

The following table summarizes our results of operations for the thirteen and twenty-six weeks ended June 28, 2023 and June 29, 2022:

Thirteen Weeks Ended Twenty-Six Weeks Ended

(dollar amounts in thousands) June 28

The following table summarizes our results of operations for the thirteen and thirty-nine weeks ended September 27, 2023 and September 28, 2022:

Thirteen Weeks Ended Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Shack sales $ 264,980 95.9 % $ 219,501 96.4 % $ 771,044 96.2 % $ 639,346 96.6 %

23 unchanged sentences

(1) As a percentage of Shack sales.

(2) The Company elected to reclassify certain marketing expenses for prior periods to conform with the presentation for the thirteen and twenty-six weeks ended June 28, 2023.

(2) The Company elected to reclassify certain marketing expenses for prior periods to conform with the presentation for the thirteen and thirty-nine weeks ended September 27, 2023.

These reclassifications had no effect on previously reported Net Loss.

For the thirteen and twenty-six weeks ended June 29, 2022, the Company reclassified $412 and $478, respectively, from Other operating expenses to General and administrative expenses in the accompanying Condensed Consolidated Financial Statements.

For the thirteen and thirty-nine weeks ended September 28, 2022, the Company reclassified $286 and $764, respectively, from Other operating expenses to General and administrative expenses in the accompanying Condensed Consolidated Financial Statements.

Shack sales represent the aggregate sales of food, beverages and Shake Shack branded merchandise at our domestic Company-operated Shacks and gift card breakage income.

Shack sales in any period are directly influenced by the number of operating weeks in such period and the total number of open Shacks.

Thirteen Weeks Ended Twenty-Six Weeks Ended

(dollar amounts in thousands) June 28

Thirteen Weeks Ended Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Shack sales $ 264,980 $ 219,501 $ 771,044 $ 639,346

3 unchanged sentences

Shake Shack Inc.

Shack sales for the thirteen weeks ended June 28, 2023 increased 17.4% to $261.8 million versus the same period last year.

Shack sales for the twenty-six weeks ended June 28, 2023 increased 20.5% to $506.1 million versus the same period last year.

The increases in Shack sales for the thirteen and twenty-six weeks ended June 28, 2023 were primarily due to the opening of 40 new domestic Company-operated Shacks between June 29, 2022 and June 28, 2023, which contributed $31.2 million and $53.0 million, respectively, as well as increased menu prices, which contributed $17.2 million and $35.0 million, respectively, partially offset by a decline in items per check.

Form 10-Q | 29

Shack sales for the thirteen weeks ended September 27, 2023 increased 20.7% to $265.0 million versus the same period last year.

The increase was primarily due to the opening of 48 new domestic Company-operated Shacks between September 28, 2022 and September 27, 2023, which contributed $40.7 million, as well as increased menu prices, which contributed $20.0 million, partially offset by a decline in guest traffic.

Shack sales for the thirty-nine weeks ended September 27, 2023 increased 20.6% to $771.0 million versus the same period last year.

The increase was primarily due to the opening of 48 new domestic Company-operated Shacks between September 28, 2022 and September 27, 2023, which contributed $86.7 million, as well as increased menu prices, which contributed $55.0 million, partially offset by a decrease in items per check.

Licensing Revenue

1 unchanged sentence

License fees are calculated as a percentage of sales and territory fees are payments for the exclusive right to develop Shacks in a specific geographic area.

Thirteen Weeks Ended Twenty-Six Weeks Ended

(dollar amounts in thousands) June 28

Thirteen Weeks Ended Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Licensing revenue $ 11,227 $ 8,313 $ 30,246 $ 22,611

2 unchanged sentences

Percentage change compared to prior year 35.1 % 33.8 %

Licensing revenue for the thirteen weeks ended June 28, 2023 increased 29.8% to $10.0 million versus the same period last year.

Licensing revenue for the twenty-six weeks ended June 28, 2023 increased 33.0% to $19.0 million versus the same period last year.

The increases in Licensing revenue for the thirteen and twenty-six weeks ended June 28, 2023 were primarily due to the opening of 36 net new licensed Shacks between June 29, 2022 and June 28, 2023, which contributed $1.7 million and $2.9 million, respectively, as well as higher sales at existing licensed Shacks, particularly domestic airports.

Licensing revenue for the thirteen weeks ended September 27, 2023 increased 35.1% to $11.2 million versus the same period last year.

Licensing revenue for the thirty-nine weeks ended September 27, 2023 increased 33.8% to $30.2 million versus the same period last year.

The increases in Licensing revenue for the thirteen and thirty-nine weeks ended September 27, 2023 were primarily due to the opening of 45 net new licensed Shacks between September 28, 2022 and September 27, 2023, which contributed $1.9 million and $4.1 million, respectively, as well as higher sales at existing licensed Shacks, particularly domestic airports.

Food and Paper Costs

1 unchanged sentence

The components of Food and paper costs are variable by nature, change with sales volume, are impacted by menu mix, channel mix and fluctuations in commodity costs, as well as geographic scale and proximity.

Thirteen Weeks Ended Twenty-Six Weeks Ended

(dollar amounts in thousands) June 28

Thirteen Weeks Ended Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Food and paper costs $ 77,180 $ 67,774 $ 224,752 $ 193,645

2 unchanged sentences

Percentage change compared to prior year 13.9 % 16.1 %

Food and paper costs for the thirteen weeks ended June 28, 2023 increased 14.9% to $75.8 million versus the same period last year.

Food and paper costs for the twenty-six weeks ended June 28, 2023 increased 17.2% to $147.6 million versus the same period last year.

The increases for the thirteen and twenty-six weeks ended June 28, 2023 were primarily due to the opening of 40 new domestic Company-operated Shacks between June 29, 2022 and June 28, 2023 as well as increased commodity costs.

As a percentage of Shack sales, the decreases in Food and paper costs for the thirteen and twenty-six weeks ended June 28, 2023 were primarily driven by menu price increases partially offset by increased commodity costs mentioned above.

Food and paper costs for the thirteen weeks ended September 27, 2023 increased 13.9% to $77.2 million versus the same period last year.

Food and paper costs for the thirty-nine weeks ended September 27, 2023 increased 16.1% to $224.8 million versus the same period last year.

The increases for the thirteen and thirty-nine weeks ended September 27, 2023 were primarily due to the opening of 48 new domestic Company-operated Shacks between September 28, 2022 and September 27, 2023, which contributed approximately $12.2 million and $28.0 million, respectively.

As a percentage of Shack sales, the decreases in Food and paper costs for the thirteen and thirty-nine weeks ended September 27, 2023 were primarily driven by menu price increases partially offset by increased commodity costs, particularly in beef and fries.

30 | Shake Shack Inc.

Form 10-Q | 29

Labor and Related Expenses

Labor and related expenses include domestic Company-operated Shack-level hourly and management wages, bonuses, payroll taxes, equity-based compensation, workers' compensation expense and medical benefits.

Labor and related expenses include domestic Company-operated Shack-level hourly and management wage rates, bonuses, payroll taxes, equity-based compensation, workers' compensation expense and medical benefits.

As we expect with other variable expense items, labor costs should grow as our Shack sales grow.

Factors that influence labor costs include minimum wage and payroll tax legislation, health care costs, size and location of the Shack and the performance of our domestic Company-operated Shacks.

Thirteen Weeks Ended Twenty-Six Weeks Ended

(dollar amounts in thousands) June 28

Thirteen Weeks Ended Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Labor and related expenses $ 76,233 $ 64,638 $ 225,655 $ 190,954

2 unchanged sentences

Percentage change compared to prior year 17.9 % 18.2 %

Labor and related expenses for the thirteen weeks ended June 28, 2023 increased 14.1% to $75.2 million versus the same period last year.

Labor and related expenses for the twenty-six weeks ended June 28, 2023 increased 18.3% to $149.4 million versus the same period last year.

The increases for the thirteen and twenty-six weeks ended June 28, 2023 were primarily due to the opening of 40 new domestic Company-operated Shacks between June 29, 2022 and June 28, 2023.

As a percentage of Shack sales, the decreases in Labor and related expenses for the thirteen and twenty-six weeks ended June 28, 2023 were primarily due to labor efficiencies and sales leverage partially offset by increased wages.

Labor and related expenses for the thirteen weeks ended September 27, 2023 increased 17.9% to $76.2 million versus the same period last year.

Labor and related expenses for the thirty-nine weeks ended September 27, 2023 increased 18.2% to $225.7 million versus the same period last year.

As a percentage of Shack sales, the decreases in Labor and related expenses for the thirteen and thirty-nine weeks ended September 27, 2023 were primarily due to labor efficiencies and sales leverage partially offset by increased wages.

Other Operating Expenses

Other operating expenses consist of delivery commissions, Shack-level marketing expenses, repairs and maintenance, utilities and other operating expenses incidental to operating our domestic Company-operated Shacks, such as non-perishable supplies, credit card fees and property insurance.

Thirteen Weeks Ended Twenty-Six Weeks Ended

(dollar amounts in thousands) June 28

Thirteen Weeks Ended Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Other operating expenses $ 37,307 $ 33,680 $ 108,352 $ 96,002

2 unchanged sentences

Percentage change compared to prior year 10.8 % 12.9 %

Other operating expenses for the thirteen weeks ended June 28, 2023 increased 12.3% to $36.1 million versus the same period last year.

Other operating expenses for the twenty-six weeks ended June 28, 2023 increased 14.0% to $71.0 million versus the same period last year.

The increases for the thirteen and twenty-six weeks ended June 28, 2023 were primarily due to higher facilities costs, mainly utilities.

As a percentage of Shack sales, the decrease in Other operating expenses for the thirteen weeks ended June 28, 2023 was primarily driven by lower delivery commissions as a result of a shift in channel mix and lower glove costs, partially offset by higher utility costs.

As a percentage of Shack sales, the decrease in Other operating expenses for the twenty-six weeks ended June 28, 2023 was primarily driven by lower delivery commissions as a result of a shift in channel mix, sales leverage, and lower marketing spend, partially offset by higher utility costs.

Other operating expenses for the thirteen weeks ended September 27, 2023 increased 10.8% to $37.3 million versus the same period last year.

Other operating expenses for the thirty-nine weeks ended September 27, 2023 increased 12.9% to $108.4 million versus the same period last year.

The increases for the thirteen and thirty-nine weeks ended September 27, 2023 were primarily driven by higher facilities costs, mainly utilities, due to the opening of 48 new domestic Company-operated Shacks between September 28, 2022 and September 27, 2023 as well as increased transaction costs associated with higher sales.

As a percentage of Shack sales, the decrease in Other operating expenses for the thirteen weeks ended September 27, 2023 was primarily driven by decreased repair and maintenance expenses, lower delivery commissions due to a shift in channel mix and sales leverage.

As a percentage of Shack sales, the decrease in Other operating expenses for the thirty-nine weeks ended September 27, 2023 was primarily driven by lower delivery commissions as a result of a shift in channel mix, lower repair and maintenance expenses and sales leverage.

Shake Shack Inc.

Form 10-Q | 31

Occupancy and Related Expenses

Occupancy and related expenses consist of Shack-level occupancy expenses (including rent, common area expenses and certain local taxes), and exclude occupancy expenses associated with unopened Shacks, which are recorded separately in Pre-opening costs.

Thirteen Weeks Ended Twenty-Six Weeks Ended

(dollar amounts in thousands) June 28

Thirteen Weeks Ended Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Occupancy and related expenses $ 20,300 $ 17,337 $ 58,684 $ 50,270

2 unchanged sentences

Percentage change compared to prior year 17.1 % 16.7 %

Occupancy and related expenses for the thirteen weeks ended June 28, 2023 increased 18.9% to $19.8 million versus the same period last year.

Occupancy and related expenses for the twenty-six weeks ended June 28, 2023 increased 16.6% to $38.4 million versus the same period last year.

The increases for the thirteen and twenty-six weeks ended June 28, 2023 were primarily due to the opening of 40 new domestic Company-operated Shacks between June 29, 2022 and June 28, 2023.

As a percentage of Shack sales, the increase in Occupancy and related expenses for the thirteen weeks ended June 28, 2023 was primarily due to an increase in common area maintenance charges, partially offset by sales leverage.

As a percentage of Shack sales, the decrease in Occupancy and related expenses for the twenty-six weeks ended June 28, 2023 was primarily due to sales leverage.

Occupancy and related expenses for the thirteen weeks ended September 27, 2023 increased 17.1% to $20.3 million versus the same period last year.

Occupancy and related expenses for the thirty-nine weeks ended September 27, 2023 increased 16.7% to $58.7 million versus the same period last year.

As a percentage of Shack sales, the decrease in Occupancy and related expenses for the thirteen weeks ended September 27, 2023 was primarily driven by a decrease in base rent and sales leverage.

As a percentage of Shack sales, the decrease in Occupancy and related expenses for the thirty-nine weeks ended September 27, 2023 was primarily due to sales leverage and lower base rent, partially offset by an increase in common area maintenance charges.

General and Administrative Expenses

General and administrative expenses consist of costs associated with corporate and administrative functions that support Shack development and operations, as well as equity-based compensation expense.

Thirteen Weeks Ended Twenty-Six Weeks Ended

(dollar amounts in thousands) June 28

Thirteen Weeks Ended Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

General and administrative expenses $ 30,939 $ 26,931 $ 93,726 $ 87,804

2 unchanged sentences

Percentage change compared to prior year 14.9 % 6.7 %

General and administrative expenses for the thirteen weeks ended June 28, 2023 increased 6.7% to $31.5 million versus the same period last year.

General and administrative expenses for the twenty-six weeks ended June 28, 2023 increased 3.1% to $62.8 million versus the same period last year.

The increase in General and administrative expenses for the thirteen weeks ended June 28, 2023 was primarily due to professional fees related to a non-recurring matter of $1.7 million, an increase in wages and other team costs as well as investments in marketing and technology initiatives, partially offset by the absence of expenses related to the Company's retreat in the prior year period.

The increase in General and administrative expenses for the twenty-six weeks ended June 28, 2023 was primarily due to an increase in wages and other team costs, professional fees related to a non-recurring matter of $2.3 million as well as investments in marketing and technology initiatives, partially offset by the absence of accruals related to legal matters in the prior year period.

As a percentage of Total revenue, the decreases in General and administrative expenses for the thirteen and twenty-six weeks ended June 28, 2023 were primarily due to sales leverage partially offset by the aforementioned items.

General and administrative expenses for the thirteen weeks ended September 27, 2023 increased 14.9% to $30.9 million versus the same period last year.

General and administrative expenses for the thirty-nine weeks ended September 27, 2023 increased 6.7% to $93.7 million versus the same period last year.

The increase in General and administrative expenses for the thirteen weeks ended September 27, 2023 was primarily due to increased wages and other team costs as well as investments in marketing and technology initiatives.

The increase in General and administrative expenses for the thirty-nine weeks ended September 27, 2023 was primarily due to increased wages and other team costs, professional fees related to a non-recurring matter of $2.3 million as well as investments in marketing and technology initiatives, partially offset by lower legal expenses compared to the prior year period.

As a percentage of Total revenue, the decreases in General and administrative expenses for the thirteen and thirty-nine weeks ended September 27, 2023 were primarily due to sales leverage partially offset by the aforementioned items.

32 | Shake Shack Inc.

Form 10-Q | 31

Depreciation and Amortization Expense

Depreciation and amortization expense primarily consists of the depreciation of fixed assets, including leasehold improvements and equipment.

Thirteen Weeks Ended Twenty-Six Weeks Ended

(dollar amounts in thousands) June 28

Thirteen Weeks Ended Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Depreciation and amortization expense $ 23,130 $ 18,647 $ 66,704 $ 53,589

2 unchanged sentences

Percentage change compared to prior year 24.0 % 24.5 %

Depreciation and amortization expense for the thirteen weeks ended June 28, 2023 increased 23.0% to $22.3 million versus the same period last year.

Depreciation and amortization expense for the twenty-six weeks ended June 28, 2023 increased 24.7% to $43.6 million versus the same period last year.

The increases in Depreciation and amortization expense for the thirteen and twenty-six weeks ended June 28, 2023 were predominantly due to incremental depreciation of capital expenditures related to the opening of 40 new domestic Company-operated Shacks and technology projects placed into service between June 29, 2022 and June 28, 2023.

As a percentage of Total revenue, the increases in Depreciation and amortization expense for the thirteen and twenty-six weeks ended June 28, 2023 were primarily due to new Shack openings as well as additional depreciation related to technology projects placed into service between June 29, 2022 and June 28, 2023.

Depreciation and amortization expense for the thirteen weeks ended September 27, 2023 increased 24.0% to $23.1 million versus the same period last year.

Depreciation and amortization expense for the thirty-nine weeks ended September 27, 2023 increased 24.5% to $66.7 million versus the same period last year.

The increases in Depreciation and amortization expense for the thirteen and thirty-nine weeks ended September 27, 2023 were predominantly due to incremental depreciation of capital expenditures related to the opening of 48 new domestic Company-operated Shacks and technology projects placed into service between September 28, 2022 and September 27, 2023.

As a percentage of Total revenue, the increases in Depreciation and amortization expense for the thirteen and thirty-nine weeks ended September 27, 2023 were primarily due to the aforementioned items.

Pre-Opening Costs

3 unchanged sentences

Additionally, domestic Company-operated Shack openings in new geographic markets may initially experience higher pre-opening costs than our established geographic markets, such as the New York City metropolitan area, where we have greater economies of scale and incur lower travel and lodging costs for our training team.

Thirteen Weeks Ended Twenty-Six Weeks Ended

(dollar amounts in thousands) June 28

Thirteen Weeks Ended Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Pre-opening costs $ 4,969 $ 3,041 $ 14,103 $ 8,576

2 unchanged sentences

Percentage change compared to prior year 63.4 % 64.4 %

Pre-opening costs for the thirteen weeks ended June 28, 2023 increased 97.6% to $5.6 million versus the same period last year.

Pre-opening costs for the twenty-six weeks ended June 28, 2023 increased 65.0% to $9.1 million versus the same period last year.

The increases in Pre-opening costs for the thirteen and twenty-six weeks ended June 28, 2023 were primarily due to more Shack openings compared to the prior year periods, as well as increased wages for our Shack teams and increased occupancy expense related to the timing of Shack openings throughout the year, compared to the prior-year periods.

Pre-opening costs for the thirteen weeks ended September 27, 2023 increased 63.4% to $5.0 million versus the same period last year.

Pre-opening costs for the thirty-nine weeks ended September 27, 2023 increased 64.4% to $14.1 million versus the same period last year.

The increase in Pre-opening costs for the thirteen weeks ended September 27, 2023 was primarily due to increased wages and benefits for our Shack teams related to the timing of Shack openings throughout the year, legal costs and travel costs, partially offset by a decrease in occupancy expense related to the timing of Shack openings throughout the year, compared to the prior-year period.

The increase in Pre-opening costs for the thirty-nine weeks ended September 27, 2023 was primarily due to increases in wages and benefits for our Shack teams and occupancy expense related to the timing of Shack openings throughout the year, legal costs and smallwares compared to the prior-year period.

Impairment and Loss on Disposal of Assets

2 unchanged sentences

Shake Shack Inc.

Form 10-Q | 33

the net book value of assets that have been retired which primarily consists of furniture, equipment and fixtures that were replaced in the normal course of business.

Thirteen Weeks Ended Twenty-Six Weeks Ended

(dollar amounts in thousands) June 28

Thirteen Weeks Ended Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Impairment and loss on disposal of assets $ 492 $ 592 $ 2,098 $ 1,697

2 unchanged sentences

Percentage change compared to prior year (16.9) % 23.6 %

Impairment and loss on disposal of assets for the thirteen weeks ended June 28, 2023 increased 67.4% to $0.9 million versus the same period last year.

Impairment and loss on disposal of assets for the twenty-six weeks ended June 28, 2023 increased 45.3% to $1.6 million versus the same period last year.

The increases in Impairment and loss on disposal of assets for the thirteen and twenty-six weeks ended June 28, 2023 were primarily due to the number of Shacks maturing in our base.

Impairment and loss on disposal of assets for the thirteen weeks ended September 27, 2023 decreased 16.9% to $0.5 million versus the same period last year.

Impairment and loss on disposal of assets for the thirty-nine weeks ended September 27, 2023 increased 23.6% to $2.1 million versus the same period last year.

The decrease in Impairment and loss on disposal of assets for the thirteen weeks ended September 27, 2023 was primarily due to a reduction in abandoned construction projects in the current year compared to the prior year.

The increase in Impairment and loss on disposal of assets for the thirty-nine weeks ended September 27, 2023 was primarily due to the number of Shacks maturing in our base as well as disposal of home office assets.

Other Income, Net

Other income, net consists primarily of interest income, adjustments to liabilities under our tax receivable agreement, dividend income and net unrealized and realized gains and losses from marketable securities.

Thirteen Weeks Ended Twenty-Six Weeks Ended

(dollar amounts in thousands) June 28

Thirteen Weeks Ended Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Other income, net $ 3,441 $ 1,482 $ 9,505 $ 1,731

2 unchanged sentences

Percentage change compared to prior year 132.2 % 449.1 %

Other income, net for the thirteen weeks ended June 28, 2023 increased to $3.2 million.

Other income, net for the twenty-six weeks ended June 28, 2023 increased to $6.1 million.

The increases in Other income, net for the thirteen and twenty-six weeks ended June 28, 2023 were primarily due to an increase in income from cash equivalents of $2.8 million and $5.0 million, respectively, which related to an increase in interest rates.

Other income, net for the thirteen weeks ended September 27, 2023 increased to $3.4 million from $1.5 million.

Other income, net for the thirty-nine weeks ended September 27, 2023 increased to $9.5 million from $1.7 million.

The increases in Other income, net for the thirteen and thirty-nine weeks ended September 27, 2023 were primarily due to an increase in income from cash equivalents of $1.2 million and $6.2 million, respectively, from increased interest rates.

Interest Expense

Interest expense generally consists of interest on the current portion of our liabilities under the Tax Receivable Agreement, imputed interest related to our financing equipment leases, amortization of deferred financing costs, interest and fees on our Revolving Credit Facility and amortization of debt issuance costs.

Thirteen Weeks Ended Twenty-Six Weeks Ended

(dollar amounts in thousands) June 28

Thirteen Weeks Ended Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Interest expense $ (433) $ (475) $ (1,241) $ (1,145)

2 unchanged sentences

Percentage change compared to prior year (8.8) % 8.4 %

Interest expense for the thirteen weeks ended June 28, 2023 increased 28.6% to $0.4 million versus the same period last year.

Interest expense for the twenty-six weeks ended June 28, 2023 increased 20.6% to $0.8 million versus the same period last year.

The increases in Interest expense for the thirteen and twenty-six weeks ended June 28, 2023 were primarily due to an increase in various sales tax audit assessment charges.

Interest expense for the thirteen weeks ended September 27, 2023 decreased 8.8% to $0.4 million versus the same period last year.

Interest expense for the thirty-nine weeks ended September 27, 2023 increased 8.4% to $1.2 million versus the same period last year.

The decrease in Interest expense for the thirteen weeks ended September 27, 2023 was primarily due to decreased various sales tax audit assessment charges, partially offset by increased finance lease charges.

The increase in Interest expense for the thirty-nine weeks ended September 27, 2023 was primarily due to increased finance lease charges.

34 | Shake Shack Inc.

Form 10-Q | 33

Income Tax Expense (Benefit)

8 unchanged sentences

We are also subject to withholding taxes in foreign jurisdictions.

Thirteen Weeks Ended Twenty-Six Weeks Ended

(dollar amounts in thousands) June 28

Thirteen Weeks Ended Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Income tax expense (benefit) $ 529 $ (1,508) $ 1,743 $ (5,098)

2 unchanged sentences

Percentage change compared to prior year (135.1) % (134.2) %

Our effective income tax rates for the thirteen weeks ended June 28, 2023 and June 29, 2022 were 4.6% and (118.6)%, respectively.

The increase was primarily driven by the change in pre-tax income, and the impact of permanent differences and discrete expense on pre-tax income compared to pre-tax loss in the same period last year.

Our effective income tax rates for the thirteen weeks ended September 27, 2023 and September 28, 2022 were 6.1% and 39.5%, respectively.

The decrease was primarily driven by the change in pre-tax income and the impact of permanent differences and discrete expense on pre-tax income for the period compared to pre-tax loss for the same period last year.

The Company's ownership interest in SSE Holdings is directly related to its share of the taxable income (loss) of SSE Holdings.

Our weighted average ownership interest in SSE Holdings was 93.3% and 93.1% for the thirteen weeks ended June 28, 2023 and June 29, 2022, respectively.

Our effective income tax rates for the twenty-six weeks ended June 28, 2023 and June 29, 2022 were 17.8% and 22.2%, respectively.

The decrease was primarily driven by the change in pre-tax income and the effect of permanent differences, primarily tax credits, on pre-tax income for the period compared to pre-tax loss in the same period last year, as well as a decrease in expense due to tax benefits related to certain windfalls in equity based compensation.

Our weighted average ownership interest in SSE Holdings was 93.3% and 93.2% for the thirteen weeks ended September 27, 2023 and September 28, 2022, respectively.

Our effective income tax rates for the thirty-nine weeks ended September 27, 2023 and September 28, 2022 were 11.3% and 25.5%, respectively.

The decrease was primarily driven by the change in pre-tax income and the effect of permanent differences, primarily tax credits, on pre-tax income for the period compared to pre-tax loss for the same period last year, as well as a decrease in expense due to tax benefits related to certain windfalls in equity-based compensation.

The decrease was partially offset by an increase in the Company's ownership interest in SSE Holdings which increased its share of the taxable income (loss) of SSE Holdings.

Our weighted average ownership interest in SSE Holdings was 93.3% and 93.1% for the twenty-six weeks ended June 28, 2023 and June 29, 2022, respectively.

Our weighted average ownership interest in SSE Holdings was 93.3% and 93.1% for the thirty-nine weeks ended September 27, 2023 and September 28, 2022, respectively.

Net Income (Loss) Attributable to Non-Controlling Interests

5 unchanged sentences

and the non-controlling interest holders.

Thirteen Weeks Ended Twenty-Six Weeks Ended

(dollar amounts in thousands) June 28

Thirteen Weeks Ended Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Net income (loss) attributable to non-controlling interests $ 509 $ (287) $ 696 $ (1,522)

Percentage of Total revenue 0.2 % (0.1) % 0.1 % (0.2) %

Net income (loss) attributable to non-controlling interests for the thirteen weeks ended June 28, 2023 improved to income of $0.3 million from a loss of $0.1 million in the same period last year.

Net income (loss) attributable to non-controlling interests for the twenty-six weeks ended June 28, 2023 improved to income of $0.2 million from a loss of $1.2 million in the same period last year.

The improvements in Net income (loss) attributable to non-controlling interests for the thirteen and twenty-six weeks ended June 28, 2023 were primarily due to an increase in net results compared to the same periods last year, partially offset by a decrease in the non-controlling interest holders' weighted average ownership, which was 6.7% for the thirteen and twenty-six weeks ended June 28, 2023 and 6.9% for the thirteen and twenty-six weeks ended June 29, 2022.

Net income (loss) attributable to non-controlling interests for the thirteen weeks ended September 27, 2023 improved to income of $0.5 million from a loss of $0.3 million in the same period last year.

Net income (loss) attributable to non-controlling interests for the thirty-nine weeks ended September 27, 2023 improved to income of $0.7 million from a loss of $1.5 million in the same period last year.

The improvements in Net income (loss) attributable to non-controlling interests for the thirteen and thirty-nine weeks ended September 27, 2023 were primarily due to an increase in net results compared to the same periods last year, partially offset by a decrease in the non-controlling interest holders' weighted average ownership, which was 6.7% for the thirteen

Shake Shack Inc.

Form 10-Q | 35

and thirty-nine weeks ended September 27, 2023 and 6.8% and 6.9%, respectively for the thirteen and thirty-nine weeks ended September 28, 2022.

NON-GAAP FINANCIAL MEASURES

16 unchanged sentences

36 | Shake Shack Inc.

Form 10-Q | 35

Thirteen Weeks Ended Twenty-Six Weeks Ended

(dollar amounts in thousands) June 28

Thirteen Weeks Ended Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Income (loss) from operations $ 5,657 $ (4,826) $ 7,216 $ (20,580)

11 unchanged sentences

20.4 % 16.4 % 19.9 % 17.0 %

(1) The Company has elected to reclassify certain marketing expenses from Other operating expenses to General and administrative expenses in the accompanying Condensed Consolidated Financial Statements for prior periods to be comparable with the classification for the thirteen and twenty-six weeks ended June 28, 2023.

(2) For the twenty-six weeks ended June 29, 2022, Shack-level operating profit margin includes a $1,281 cumulative catch-up adjustment for gift card breakage income, recognized in Shack sales.

(2) For the thirty-nine weeks ended September 28, 2022, Shack-level operating profit margin includes a $1,281 cumulative catch-up adjustment for gift card breakage income, recognized in Shack sales.

(3) As a percentage of Shack sales.

10 unchanged sentences

Shake Shack Inc.

Form 10-Q | 37

Limitations of the Usefulness of These Measures

4 unchanged sentences

A reconciliation of EBITDA and adjusted EBITDA to Net income (loss), the most directly comparable GAAP measure, is as follows.

Thirteen Weeks Ended Twenty-Six Weeks Ended

(dollar amounts in thousands) June 28

Thirteen Weeks Ended Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Net income (loss) $ 8,136 $ (2,311) $ 13,737 $ (14,896)

8 unchanged sentences

Gift card breakage cumulative catch-up adjustment — — — (1,281)

1,693 — 2,321 —

Adjusted EBITDA $ 35,784 $ 19,807 $ 100,399 $ 53,141

2 unchanged sentences

(1) Related to professional fees for a non-recurring matter.

(2) Calculated as a percentage of Total revenue, which was $271.8 million and $525.1 million for the thirteen and twenty-six weeks ended June 28, 2023, respectively, and $230.8 million and $434.1 million for the thirteen and twenty-six weeks ended June 29, 2022, respectively.

(2) Calculated as a percentage of Total revenue, which was $276.2 million and $801.3 million for the thirteen and thirty-nine weeks ended September 27, 2023, respectively, and $227.8 million and $662.0 million for the thirteen and thirty-nine weeks ended September 28, 2022, respectively.

Adjusted Pro Forma Net Income (Loss) and Adjusted Pro Forma Earnings (Loss) Per Fully Exchanged and Diluted Share

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By assuming the full exchange of all outstanding LLC Interests, we believe these measures facilitate comparisons with other companies that have different organizational and tax structures, as well as comparisons period over period because it eliminates the effect of any changes in Net income (loss) attributable to Shake Shack Inc.

driven by increases in our ownership of SSE Holdings, which are unrelated to our operating performance, and excludes items that are non-recurring or may not be indicative of our ongoing operating performance.

driven by increases in our ownership of SSE Holdings, which are unrelated to

38 | Shake Shack Inc.

Form 10-Q | 37

our operating performance, and excludes items that are non-recurring or may not be indicative of our ongoing operating performance.

Limitations of the Usefulness of These Measures

5 unchanged sentences

Shake Shack Inc.

Thirteen Weeks Ended Twenty-Six Weeks Ended

(in thousands, except per share amounts) June 28

Form 10-Q | 39

Thirteen Weeks Ended Thirty-Nine Weeks Ended

(in thousands, except per share amounts) September 27

2023 September 28

2022 September 27

2023 September 28

Net income (loss) attributable to Shake Shack Inc.

4 unchanged sentences

Gift card breakage cumulative catch-up adjustment — — — (1,281)

1,693 — 2,321 —

Tax impact of above adjustments (3)

4 unchanged sentences

— 2,871 — 2,899

Dilutive effect of equity awards — 104 — —

Dilutive effect of convertible notes — 1,467 — —

Adjusted pro forma fully exchanged weighted average shares of Class A common stock outstanding—diluted 43,978 42,145 43,884 42,120

Adjusted pro forma earnings (loss) per fully exchanged share—diluted $ 0.17 $ (0.06) $ 0.34 $ (0.25)

Thirteen Weeks Ended Twenty-Six Weeks Ended

Thirteen Weeks Ended Thirty-Nine Weeks Ended

2023 September 28

2022 September 27

2023 September 28

Earnings (loss) per share of Class A common stock—diluted $ 0.19 $ (0.05) $ 0.31 $ (0.34)

6 unchanged sentences

(2) Related to professional fees for a non-recurring matter.

(3) Represents the tax effect of the aforementioned adjustments and pro forma adjustments to reflect corporate income taxes at assumed effective tax rates of 14.9% and 25.1% for the thirteen and twenty-six weeks ended June 28, 2023, respectively, and 14.9% and 25.0% for the thirteen and twenty-six weeks ended June 29, 2022, respectively.

(3) Represents the tax effect of the aforementioned adjustments and pro forma adjustments to reflect corporate income taxes at assumed effective tax rates of 15.1% and 20.5% for the thirteen and thirty-nine weeks ended September 27, 2023, respectively, and 39.2% and 28.8% for the thirteen and thirty-nine weeks ended September 28, 2022, respectively.

Amounts include provisions for U.S.

3 unchanged sentences

40 | Shake Shack Inc.

Form 10-Q | 39

LIQUIDITY AND CAPITAL RESOURCES

1 unchanged sentence

Our primary sources of liquidity are cash from operations, cash and cash equivalents on hand, and availability under our Revolving Credit Facility.

As of June 28, 2023, we maintained a Cash and cash equivalents balance of $203.7 million.

As of September 27, 2023, we maintained a Cash and cash equivalents balance of $190.0 million.

In March 2021, we issued 0% Convertible Senior Notes (“Convertible Notes”), and received $243.8 million of proceeds, net of discounts.

7 unchanged sentences

In addition, we are obligated to make payments to certain members of SSE Holdings under the Tax Receivable Agreement.

As of June 28, 2023, such obligations totaled $235.4 million.

As of September 27, 2023, such obligations totaled $235.6 million.

Amounts payable under the Tax Receivable Agreement are contingent upon, among other things, (i) generation of future taxable income over the term of the Tax Receivable Agreement and (ii) future changes in tax laws.

6 unchanged sentences

The following table presents a summary of our cash flows from operating, investing and financing activities.

Twenty-Six Weeks Ended

(in thousands) June 28

Thirty-Nine Weeks Ended

(in thousands) September 27

2023 September 28

Net cash provided by operating activities $ 90,591 $ 54,335

1 unchanged sentence

Net cash used in financing activities (4,825) (4,529)

Effect of exchange rate changes on cash and cash equivalents

Net decrease in Cash and cash equivalents (40,501) (45,408)

1 unchanged sentence

Cash and cash equivalents at end of period $ 190,020 $ 256,998

Operating Activities

For the twenty-six weeks ended June 28, 2023, net cash provided by operating activities was $62.2 million compared to $35.2 million for the twenty-six weeks ended June 29, 2022, an increase of $27.0 million.

The increase was primarily driven by a $27.0 million improvement in net results after excluding non-cash charges, as working capital remained flat period-over-period.

Shake Shack Inc.

Form 10-Q | 41

Operating Activities

For the thirty-nine weeks ended September 27, 2023, net cash provided by operating activities was $90.6 million compared to $54.3 million for the thirty-nine weeks ended September 28, 2022, an increase of $36.3 million.

The increase was primarily driven by a $43.4 million improvement in net results after excluding non-cash charges, partially offset by changes in working capital of $7.2 million.

The changes in working capital included an increase in payments on lease liabilities, net of tenant improvement receipts and the timing and payments of legal settlements, partially offset by a decrease in the construction in progress accruals due to the timing of shack openings this period compared to the same period last year.

Investing Activities

For the twenty-six weeks ended June 28, 2023, net cash used in investing activities was $85.4 million compared to $55.5 million for the twenty-six weeks ended June 29, 2022, an increase of $29.9 million.

For the thirty-nine weeks ended September 27, 2023, net cash used in investing activities was $126.3 million compared to $95.2 million for the thirty-nine weeks ended September 28, 2022, an increase of $31.1 million.

This increase was primarily due to a net increase in marketable securities activity as a result of the purchase of held-to-maturity debt securities of $94.0 million partially offset by the sale of equity securities of $81.5 million, and an increase of $18.2 million in capital expenditures to support our real estate development.

Financing Activities

For the twenty-six weeks ended June 28, 2023, net cash used in financing activities was $3.6 million compared to $3.8 million for the twenty-six weeks ended June 29, 2022, a decrease of $0.2 million.

This decrease was primarily due to a decrease in distributions paid to non-controlling interest holders and an increase of proceeds from stock option exercises, partially offset by an increase in withholding taxes related to the vesting of equity awards.

For the thirty-nine weeks ended September 27, 2023, net cash used in financing activities was $4.8 million compared to $4.5 million for the thirty-nine weeks ended September 28, 2022, an increase of $0.3 million.

This increase was primarily due to an increase in withholding taxes related to the vesting of equity awards, partially offset by an increase in proceeds from stock option exercises and a decrease in distributions paid to non-controlling interest holders.

Convertible Notes

6 unchanged sentences

The Revolving Credit Facility also permits the issuance of letters of credit upon our request of up to $15.0 million.

Under the Revolving Credit Facility, outstanding borrowings bear interest at either:

(i) LIBOR, or the Secured Overnight Financing Rate upon the discontinuance or unavailability of LIBOR, plus a percentage ranging from 1.0% to 2.5% or (ii) the base rate plus a percentage ranging from 0.0% to 1.5%, in each case depending on our net lease adjusted leverage ratio.

As of June 28, 2023, no amounts were outstanding under the Revolving Credit Facility.

During the thirteen weeks ended September 27, 2023, the Company entered into the fourth amendment to the Revolving Credit Facility ("Fourth Amendment"), which, among other things, modifies the benchmark interest rate to either:

(i) the base rate plus applicable margin ranging from 0.0% to 1.5% or (ii) the Secured Overnight Financing Rate (“SOFR”) plus applicable margin ranging from 1.0% to 2.5%, in each case depending on the net lease adjusted leverage ratio.

As of September 27, 2023 and December 28, 2022, no amounts were outstanding under the Revolving Credit Facility.

The obligations under the Revolving Credit Facility are secured by a first-priority security interest in substantially all of the assets of SSE Holdings and the guarantors.

1 unchanged sentence

The Revolving Credit Facility requires us to comply with maximum net lease adjusted leverage and minimum fixed charge coverage ratios, as well as other customary affirmative and negative covenants.

As of June 28, 2023, we were in compliance with all covenants.

As of September 27, 2023, we were in compliance with all covenants.

Contractual Obligations

Material contractual obligations arising in the normal course of business primarily consist of operating and finance lease obligations, long-term debt, liabilities under Tax Receivable Agreement and purchase obligations.

Material contractual obligations arising in the normal course of business primarily consist of operating and finance lease obligations, long-term debt, liabilities under the Tax Receivable Agreement and purchase obligations.

The timing and nature of these commitments are expected to have an impact on our liquidity and capital requirements in future periods.

Refer to Note 6, Debt and Note 7, Leases, in the accompanying Condensed Consolidated Financial Statements included in Part I, Item 1 for additional information relating to our long-term debt and operating and financing leases.

Liabilities under Tax Receivable Agreement include amounts to be paid to the non-controlling interest holders, assuming we will have sufficient taxable income over the term of the Tax Receivable Agreement to utilize the related tax benefits.

Refer to Note 10, Income Taxes, and Note 13, Commitments and Contingencies, in the accompanying Condensed Consolidated Financial Statements included in Part I, Item 1, for additional information relating to our Tax Receivable Agreement and related liabilities.

Purchase obligations include all legally binding contracts, including commitments for the purchase, construction or remodeling of real estate and facilities, firm minimum commitments for inventory purchases, equipment purchases, marketing-related contracts,

Refer to Note 6,

42 | Shake Shack Inc.

Form 10-Q | 41

software acquisition/license commitments and service contracts.

Debt and Note 7, Leases, in the accompanying Condensed Consolidated Financial Statements included in Part I, Item 1 for additional information relating to our long-term debt and operating and financing leases.

Liabilities under the Tax Receivable Agreement include amounts to be paid to the non-controlling interest holders, assuming we will have sufficient taxable income over the term of the Tax Receivable Agreement to utilize the related tax benefits.

The majority of our purchase obligations are due within the next 12 months.

11 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis