What changed in this filing

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Item 1. Financial Statements

2024-05-03 compared with 2023-11-03 · 198 added, 263 removed, 546 unchanged (46% of the section changed)

40 unchanged sentences

Preferred stock, no par value—10,000,000 shares authorized;

none issued and outstanding as of September 27, 2023 and December 28, 2022.

none issued and outstanding as of March 27, 2024 and December 27, 2023.

Class A common stock, $0.001 par value—200,000,000 shares authorized;

39,635,382 and

39,284,998 shares issued and outstanding as of September 27, 2023 and December 28, 2022, respectively.

39,474,315 shares issued and outstanding as of March 27, 2024 and December 27, 2023, respectively.

Class B common stock, $0.001 par value—35,000,000 shares authorized;

2,801,013 and

2,869,513 shares issued and outstanding as of September 27, 2023 and December 28, 2022, respectively.

2,834,513 shares issued and outstanding as of March 27, 2024 and December 27, 2023, respectively.

Additional paid-in capital 427,530 426,601

Accumulated deficit ( 7,496 ) ( 20,537 )

Retained earnings 18,817 16,777

Accumulated other comprehensive loss ( 4 ) ( 3 )

10 unchanged sentences

(in thousands, except per share amounts)

Thirteen Weeks Ended Thirty-Nine Weeks Ended

2023 September 28

2022 September 27

2023 September 28

Thirteen Weeks Ended

2024 March 29

Shack sales $ 280,552 $ 244,254

15 unchanged sentences

INCOME (LOSS) BEFORE INCOME TAXES 2,732 ( 755 )

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

Income tax expense 518 867

NET INCOME (LOSS) 2,214 ( 1,622 )

13 unchanged sentences

(in thousands)

Thirteen Weeks Ended Thirty-Nine Weeks Ended

2023 September 28

2022 September 27

2023 September 28

Thirteen Weeks Ended

2024 March 29

Net income (loss) $ 2,214 $ ( 1,622 )

Other comprehensive income (loss), net of tax (1) :

Other comprehensive loss, net of tax (1) :

Change in foreign currency translation adjustment ( 1 ) ( 4 )

OTHER COMPREHENSIVE INCOME (LOSS) 1 — ( 3 ) ( 2 )

OTHER COMPREHENSIVE LOSS ( 1 ) ( 4 )

COMPREHENSIVE INCOME (LOSS) 2,213 ( 1,626 )

2 unchanged sentences

$ 2,039 $ ( 1,538 )

(1) Net of tax expense of $ 0 for the thirteen and thirty-nine weeks ended September 27, 2023 and September 28, 2022.

(1) Net of tax expense of $ 0 for the thirteen weeks ended March 27, 2024 and March 29, 2023.

See accompanying Notes to Condensed Consolidated Financial Statements.

4 unchanged sentences

(in thousands, except share amounts)

For the Thirteen Weeks Ended September 27, 2023 and September 28, 2022

Common Stock Class B

Common Stock Additional

Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (Loss) Non-

Interest Total

Shares Amount Shares Amount

BALANCE, JUNE 28, 2023 39,449,246 $ 39 2,844,513 $ 3 $ 421,356 $ ( 15,123 ) $ ( 4 ) $ 25,088 $ 431,359

Net income — — — — — 7,627 — 509 8,136

Other comprehensive income (loss):

Net change in foreign currency translation adjustment — — — — — — 1 — 1

Equity-based compensation — — — — 3,563 — — — 3,563

Activity under stock compensation plans 7,022 — — — ( 469 ) — — 197 ( 272 )

Redemption of LLC Interests 10,000 — ( 10,000 ) — 71 — — ( 71 ) —

Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis — — — — ( 710 ) — — — ( 710 )

Distributions paid to non-controlling interest holders — — — — — — — ( 79 ) ( 79 )

BALANCE, SEPTEMBER 27, 2023 39,466,268 $ 39 2,834,513 $ 3 $ 423,811 $ ( 7,496 ) $ ( 3 ) $ 25,644 $ 441,998

BALANCE, JUNE 29, 2022 39,266,670 $ 39 2,871,513 $ 3 $ 410,520 $ ( 7,796 ) $ ( 1 ) $ 24,871 $ 427,636

Net loss — — — — — ( 2,024 ) — ( 287 ) ( 2,311 )

Other comprehensive income (loss):

Net change in foreign currency translation adjustment — — — — — — — — —

Equity-based compensation — — — — 3,570 — — — 3,570

Activity under stock compensation plans 11,029 — — — ( 182 ) — — 245 63

Redemption of LLC Interests 2,000 — ( 2,000 ) — 7 — — ( 7 ) —

Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis — — — — ( 641 ) — — — ( 641 )

Distributions paid to non-controlling interest holders — — — — — — — ( 65 ) ( 65 )

BALANCE, SEPTEMBER 28, 2022 39,279,699 $ 39 2,869,513 $ 3 $ 413,274 $ ( 9,820 ) $ ( 1 ) $ 24,757 $ 428,252

6 | Shake Shack Inc.

For the Thirty-Nine Weeks Ended September 27, 2023 and September 28, 2022

For the Thirteen Weeks Ended March 27, 2024 and March 29, 2023

Common Stock Class B

Common Stock Additional

Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (Loss) Non-

Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Loss Non-

Interest Total

9 unchanged sentences

Distributions paid to non-controlling interest holders — — — — — — — ( 145 ) ( 145 )

BALANCE, SEPTEMBER 27, 2023 39,466,268 $ 39 2,834,513 $ 3 $ 423,811 $ ( 7,496 ) $ ( 3 ) $ 25,644 $ 441,998

BALANCE, MARCH 27, 2024 39,635,382 $ 40 2,801,013 $ 3 $ 427,530 $ 18,817 $ ( 4 ) $ 25,907 $ 472,293

BALANCE, DECEMBER 28, 2022 39,284,998 $ 39 2,869,513 $ 3 $ 415,649 $ ( 3,487 ) $ — $ 24,632 $ 436,836

7 unchanged sentences

Distributions paid to non-controlling interest holders — — — — — — — ( 49 ) ( 49 )

BALANCE, SEPTEMBER 28, 2022 39,279,699 $ 39 2,869,513 $ 3 $ 413,274 $ ( 9,820 ) $ ( 1 ) $ 24,757 $ 428,252

See accompanying Notes to Condensed Consolidated Financial Statements.

BALANCE, MARCH 29, 2023 39,404,905 $ 39 2,844,513 $ 3 $ 417,489 $ ( 5,021 ) $ ( 4 ) $ 24,487 $ 436,993

6 | Shake Shack Inc.

Form 10-Q | 7

SHAKE SHACK INC.

1 unchanged sentence

(in thousands)

Thirty-Nine Weeks Ended

2023 September 28

Thirteen Weeks Ended

2024 March 29

OPERATING ACTIVITIES

7 unchanged sentences

Deferred income taxes ( 131 ) 1,917

Non-cash interest expense 94 181

Non-cash interest

Gain on sale of equity securities — ( 81 )

1 unchanged sentence

Impairment and loss on disposal of assets 526 722

Unrealized loss on equity securities — 400

Changes in operating assets and liabilities:

12 unchanged sentences

Purchases of property and equipment ( 33,054 ) ( 34,326 )

Purchases of held-to-maturity securities ( 94,019 ) —

Maturities of held-to-maturity marketable securities 44,361 —

Purchases of equity securities — ( 690 )

Sales of equity securities — 81,478

NET CASH USED IN INVESTING ACTIVITIES ( 126,264 ) ( 95,212 )

NET CASH PROVIDED BY INVESTING ACTIVITIES 11,307 46,462

FINANCING ACTIVITIES

1 unchanged sentence

Distributions paid to non-controlling interest holders ( 145 ) ( 49 )

Proceeds from stock option exercises 631 334

Net proceeds from stock option exercises

Employee withholding taxes related to net settled equity awards ( 5,840 ) ( 2,626 )

1 unchanged sentence

Effect of exchange rate changes on cash and cash equivalents ( 1 ) ( 4 )

DECREASE IN CASH AND CASH EQUIVALENTS ( 40,501 ) ( 45,408 )

INCREASE IN CASH AND CASH EQUIVALENTS 35,550 62,909

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 224,653 230,521

2 unchanged sentences

Shake Shack Inc.

Form 10-Q | 7

SHAKE SHACK INC.

12 unchanged sentences

8 | Shake Shack Inc.

Form 10-Q | 9

NATURE OF OPERATIONS

4 unchanged sentences

As a result, the Company consolidates the financial results of SSE Holdings and reports a non-controlling interest representing the economic interest in SSE Holdings held by the other members of SSE Holdings.

As of September 27, 2023 the Company owned 93.3 % of SSE Holdings.

As of March 27, 2024 the Company owned 93.4 % of SSE Holdings.

Unless the context otherwise requires, "we," "us," "our," "Shake Shack," the "Company" and other similar references, refer to Shake Shack Inc.

1 unchanged sentence

The Company operates and licenses Shake Shack restaurants ("Shacks"), which serve burgers, chicken, hot dogs, crinkle cut fries, shakes, frozen custard, beer, wine and more.

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.

As of March 27, 2024, there were 525 Shacks in operation system-wide, of which 299 were Company-operated Shacks and 226 were licensed Shacks.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

8 unchanged sentences

Operating results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year.

The Company has 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 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 Statements of Income (Loss).

SSE Holdings is considered a variable interest entity.

3 unchanged sentences

The assets and liabilities of SSE Holdings represent substantially all of the Company's consolidated assets and liabilities with the exception of certain deferred taxes and liabilities under the Tax Receivable Agreement.

As of September 27, 2023 and December 28, 2022, the net assets of SSE Holdings were $ 384,222 and $ 362,571 , respectively.

As of March 27, 2024 and December 27, 2023, the net assets of SSE Holdings were $ 394,523 and $ 388,250 , respectively.

The assets of SSE Holdings are subject to certain restrictions in SSE Holdings' revolving credit agreement.

3 unchanged sentences

Unless otherwise stated, references to years in this report relate to fiscal years.

10 | Shake Shack Inc.

Use of Estimates

1 unchanged sentence

Actual results could differ from those estimates.

Shake Shack Inc.

Form 10-Q | 9

Recently Issued Accounting Pronouncements

5 unchanged sentences

Sales tax collected from guests is excluded from Shack sales and the obligation is included as sales tax payable until the taxes are remitted to the appropriate taxing authorities.

Delivery services are fulfilled by third-party delivery partners whether ordered through the Shack app and website ("Company-owned platforms") or through third-party delivery platforms.

Delivery services are fulfilled by third-party delivery partners whether ordered through the Shack app, website ("Company-owned platforms") or through third-party delivery platforms.

Revenue from orders through Company-owned platforms includes delivery fees and is recognized when the delivery partner transfers the order to the guest as the Company controls the delivery.

2 unchanged sentences

The Company receives payment from the delivery partner subsequent to the transfer of the order and the payment terms are short-term in nature.

For all delivery sales, the Company is considered the principal and recognizes the revenue on a gross basis.

For all delivery sales, the Company is considered the principal and recognizes revenue on a gross basis.

The Company sells gift cards which do not have expiration dates.

1 unchanged sentence

The gift card breakage rate is determined from historical gift card redemption patterns.

Gift card breakage income for the thirteen weeks ended September 27, 2023 and September 28, 2022 was $ 60 and $ 47 , respectively.

Gift card breakage income for the thirty-nine weeks ended September 27, 2023 and September 28, 2022 was $ 238 and $ 1,415 , respectively.

The thirty-nine weeks ended September 28, 2022 included a cumulative catch-up adjustment of $ 1,281 .

Gift card breakage income for the thirteen weeks ended March 27, 2024 and March 29, 2023 was $ 134 and $ 106 , respectively.

Gift card breakage income is included in Shack sales in the Condensed Consolidated Statements of Income (Loss).

Licensing Revenue

Licensing revenue includes initial territory fees, Shack opening fees and ongoing sales-based royalty fees from licensed Shacks.

2 unchanged sentences

The Company determines the transaction price for each contract, which is comprised of the initial territory fee and an estimate of the total Shack opening fees the Company expects to be entitled to.

The calculation of total Shack opening fees included in the transaction price requires judgment, as it is based on an estimated number of Shacks the Company expects the licensee to open.

The calculation of total Shack opening fees requires judgment, as it is based on an estimated number of Shacks the Company expects the licensee to open.

The transaction price is then allocated equally to each Shack expected to open.

The performance obligation is satisfied over time, starting when a Shack opens through the end of the license term for the related Shack, therefore revenue is recognized on a straight-line basis over the license term.

Generally, payment for the initial territory fee is received upon execution of the license agreement and payment for the Shack opening fees is received either in advance of or upon

Generally, payment for the initial territory fee is received upon execution of the license agreement and payment for the Shack opening fees is received either in advance of or upon opening the related Shack.

These payments are initially deferred and

10 | Shake Shack Inc.

Form 10-Q | 11

opening the related Shack.

These payments are initially deferred and recognized in revenue as the performance obligations are satisfied.

recognized in revenue as the performance obligations are satisfied.

Revenue from sales-based royalties is recognized as the related sales occur.

Revenue disaggregated by type was as follows:

Thirteen Weeks Ended Thirty-Nine Weeks Ended

2023 September 28

2022 September 27

2023 September 28

Thirteen Weeks Ended

2024 March 29

Shack sales $ 280,552 $ 244,254

3 unchanged sentences

Total revenue $ 290,504 $ 253,278

The aggregate amount of the transaction price allocated to performance obligations that were unsatisfied or partially unsatisfied as of September 27, 2023 was $ 23,608 .

The aggregate amount of the transaction price allocated to performance obligations that were unsatisfied or partially unsatisfied as of March 27, 2024 was $ 23,370 .

The Company expects to recognize this amount as revenue over a long-term period, as the license term for each Shack ranges from 5 to 20 years.

9 unchanged sentences

Revenue recognized that was included in the respective liability balances at the beginning of the period was as follows:

Thirteen Weeks Ended Thirty-Nine Weeks Ended

2023 September 28

2022 September 27

2023 September 28

Thirteen Weeks Ended

2024 March 29

Gift card liability

$ 83 $ 82 $ 560 $ 1,725

Deferred revenue 317 244

(1) For the thirty-nine weeks ended September 28, 2022, amount includes the cumulative catch-up adjustment of $ 1,281 for gift card breakage income.

FAIR VALUE MEASUREMENTS

1 unchanged sentence

The carrying values of the Company's Cash and cash equivalents, Accounts receivable, net, Accounts payable and Accrued expenses approximate fair value due to the short-term nature of these financial instruments.

12 | Shake Shack Inc.

The Company's investments were as follows:

The Company's marketable securities were as follows:

2024 December 27

Equity securities $ — $ 80,707

Held-to-maturity securities 24,570 68,561

Total investments $ 94,957 $ 80,707

The Company classified its available-for-sale and held-to-maturity securities as Level 1 measurements within the fair value hierarchy.

Shake Shack Inc.

Form 10-Q | 11

The Company classified its held-to-maturity securities as Level 1 measurements within the fair value hierarchy.

Refer to Note 6, Debt, for additional information relating to the fair value of the Company's outstanding debt instruments.

The Company's held-to-maturity securities were as follows:

September 27, 2023

March 27, 2024

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

Treasuries $ 24,570 $ 505 $ — $ 25,075

As of September 27, 2023, the contractual maturities of held-to-maturity securities were less than 12 months.

As of March 27, 2024, the contractual maturities of held-to-maturity securities were less than 12 months.

Any expected credit losses would not be material to the Condensed Consolidated Statements of Income (Loss).

A summary of other income (expense) from investments was as follows:

Thirteen Weeks Ended Thirty-Nine Weeks Ended

2023 September 28

2022 September 27

2023 September 28

Income from investments $ 1,225 $ 290 $ 1,846 $ 502

A summary of other income (expense) from marketable securities was as follows:

Thirteen Weeks Ended

2024 March 29

Income from marketable securities

Realized gain on sale of equity securities — 81

Unrealized gain (loss) on equity securities — 161 — ( 400 )

Total $ 535 $ 576

2 unchanged sentences

The Company performs its impairment analysis at least annually or whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable.

There were no impairment charges recognized during the thirteen and thirty-nine weeks ended September 27, 2023 and September 28, 2022.

There were no impairment charges recognized during the thirteen weeks ended March 27, 2024 and March 29, 2023.

SUPPLEMENTAL BALANCE SHEET INFORMATION

7 unchanged sentences

$ 21,885 $ 18,967

Shake Shack Inc.

Form 10-Q | 13

The components of Other current liabilities were as follows:

1 unchanged sentence

Sales tax payable $ 6,453 $ 6,076

Gift card liability 1,972 2,285

Current portion of financing equipment lease liabilities 3,532 3,435

Legal reserve 2,620 6,285

Gift card liability 2,325 2,603

Other 6,215 4,989

Other current liabilities $ 18,525 $ 17,103

The components of Other long-term liabilities were as follows:

2023 December 28

Deferred licensing revenue $ 16,709 $ 14,340

Long-term portion of financing equipment lease liabilities 8,215 3,909

Other 1,398 2,438

Other long-term liabilities $ 26,322 $ 20,687

12 | Shake Shack Inc.

Convertible Notes

8 unchanged sentences

The Convertible Notes had an initial conversion rate of 5.8679 shares of Class A common stock per one thousand dollar principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $ 170.42 per share of Class A common stock.

The fair value of the Convertible Notes was approximately $ 181,408 and $ 162,500 , respectively, as of September 27, 2023 and December 28, 2022, based on external pricing data, including available quoted market prices of these instruments, and consideration of comparable debt instruments with similar interest rates and trading frequency, among other factors, and is classified as a Level 2 measurement within the fair value hierarchy.

14 | Shake Shack Inc.

Thirteen Weeks Ended Thirty-Nine Weeks Ended

Classification September 27

2023 September 28

2022 September 27

2023 September 28

The fair value of the Convertible Notes was approximately $ 226,795 and $ 205,000 , respectively, as of March 27, 2024 and December 27, 2023, based on external pricing data, including available quoted market prices of these instruments, and consideration of comparable debt instruments with similar interest rates and trading frequency, among other factors, and is classified as a Level 2 measurement within the fair value hierarchy.

Thirteen Weeks Ended

Classification March 27

2024 March 29

Amortization expense on Convertible Notes Interest expense $ 262 $ 262

6 unchanged sentences

The Revolving Credit Facility has a maturity date of March 5, 2026.

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.

In June 2023, the Company entered into the fourth amendment to the Revolving Credit Facility ("Fourth Amendment"), which, among other things, modified 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

Shake Shack Inc.

Form 10-Q | 13

dependent upon the net lease adjusted leverage ratio.

As of March 27, 2024 and December 27, 2023, 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 the Company 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 September 27, 2023, the Company was in compliance with all covenants.

As of March 27, 2024, the Company was in compliance with all covenants.

The Revolving Credit Facility also permits the issuance of letters of credit upon our request of up to $ 15,000 .

As of September 27, 2023, the Company had outstanding letters of credit of $ 3,348 in connection with the Revolving Credit Facility.

The Company had outstanding letters of credit of $ 1,863 in connection with the Revolving Credit Facility as of December 28, 2022.

Thirteen Weeks Ended Thirty-Nine Weeks Ended

Classification September 27

2023 September 28

2022 September 27

2023 September 28

As of March 27, 2024 and December 27, 2023, the Company had outstanding letters of credit of $ 3,310 and $ 3,147 , respectively, in connection with the Revolving Credit Facility.

Thirteen Weeks Ended

Classification March 27

2024 March 29

Interest expense on Revolving Credit Facility Interest expense $ 17 $ 24

Classification September 27

Classification March 27

2024 December 27

1 unchanged sentence

Nature of Leases

Shake Shack currently leases all of its domestic Company-operated Shacks, the home office and certain equipment under various non-cancelable lease agreements that expire on various dates through 2044.

The Company evaluates contracts entered into to determine whether the contract involves the use of property or equipment, which is either explicitly or implicitly identified in

Shake Shack Inc.

Form 10-Q | 15

the contract.

Shake Shack currently leases all of its Company-operated Shacks, the home office and certain equipment under various non-cancelable lease agreements that expire on various dates through 2045.

The Company evaluates contracts entered into to determine whether the contract involves the use of property or equipment, which is either explicitly or implicitly identified in the contract.

The Company evaluates whether it controls the use of the asset, which is determined by assessing whether substantially all economic benefit from the use of the asset is obtained, and whether the Company has the right to direct the use of the asset.

8 unchanged sentences

Lease expense incurred before a Shack opens is recorded in Pre-opening costs.

Once a domestic Company-operated Shack opens, the straight-line lease expense and contingent rent, if applicable, are recorded in Occupancy and related expenses.

Once a Company-operated Shack opens, the straight-line lease expense and contingent rent, if applicable, are recorded in Occupancy and related expenses.

Many of these leases also require the Company to pay real estate taxes, common area maintenance costs and other occupancy costs which are included in Occupancy and related expenses.

Finance leases are recognized in depreciation expense on a straight-line basis over the remaining lease term, along with recognition of interest expense associated with accretion of the lease liability.

14 | Shake Shack Inc.

For both operating and finance leases that contain lease and non-lease components, the components are combined and accounted for as a single lease component.

12 unchanged sentences

The Company includes these amounts in the measurement of the initial operating lease liability, and lease asset.

16 | Shake Shack Inc.

A summary of operating and finance lease assets and lease liabilities were as follows:

Classification September 27

A summary of operating and finance right-of-use assets and lease liabilities were as follows:

Classification March 27

2024 December 27

10 unchanged sentences

The components of lease expense were as follows:

Thirteen Weeks Ended Thirty-Nine Weeks Ended

Classification September 27

2023 September 28

2022 September 27

2023 September 28

Thirteen Weeks Ended

Classification March 27

2024 March 29

Operating lease cost Occupancy and related expenses

11 unchanged sentences

Form 10-Q | 15

As of September 27, 2023, future minimum lease payments for operating and finance leases consisted of the following:

As of March 27, 2024, future minimum lease payments for operating and finance leases consisted of the following:

Operating Leases Finance Leases

8 unchanged sentences

Total lease liabilities $ 515,187 $ 12,051

(1) Operating leases are net of certain tenant allowance receivables that were reclassified to Other current assets as of September 27, 2023.

As of September 27, 2023 the Company had additional operating lease commitments of $ 129,245 for non-cancelable leases without a possession date, which commence in 2023 or later.

(1) Operating leases are net of certain tenant allowance receivables that were reclassified to Other current assets as of March 27, 2024.

As of March 27, 2024, the Company had additional operating lease commitments of $ 148,440 for non-cancelable leases without a possession date, which commence in 2024 or later.

These lease commitments are materially consistent with the leases that have been executed thus far.

8 unchanged sentences

Supplemental cash flow information related to leases was as follows:

Thirty-Nine Weeks Ended

2023 September 28

Thirteen Weeks Ended

2024 March 29

Cash paid for amounts included in the measurement of lease liabilities:

15 unchanged sentences

The following table summarizes the ownership interest in SSE Holdings:

September 27, 2023 December 28, 2022

March 27, 2024 December 27, 2023

LLC Interests Ownership % LLC Interests Ownership %

3 unchanged sentences

Total LLC Interests outstanding 42,436,395 100.0 % 42,308,828 100.0 %

The weighted average ownership percentages for the applicable reporting periods are used to attribute Net income (loss) and Other comprehensive income (loss) to the non-controlling interest holders.

Thirteen Weeks Ended Thirty-Nine Weeks Ended

2023 September 28

2022 September 27

2023 September 28

The weighted average ownership percentages for the applicable reporting periods are used to attribute Net income (loss) and Other comprehensive income (loss) to the non-controlling interest holders and were as follows:

Thirteen Weeks Ended

2024 March 29

Non-controlling interest holders' weighted average ownership percentages 6.7 % 6.8 %

The following table summarizes the effects of changes in ownership of SSE Holdings on the Company's equity:

Thirteen Weeks Ended Thirty-Nine Weeks Ended

2023 September 28

2022 September 27

2023 September 28

Thirteen Weeks Ended

2024 March 29

Net income (loss) attributable to Shake Shack Inc.

$ 2,040 $ ( 1,534 )

Other comprehensive income (loss):

Unrealized gain (loss) on foreign currency translation adjustment 1 — ( 3 ) ( 2 )

Other comprehensive loss:

Unrealized holding loss on foreign currency translation adjustment ( 1 ) ( 4 )

Transfers (to) from non-controlling interests:

Increase in additional paid-in capital as a result of the redemption of LLC Interests 286 194

Decrease in additional paid-in capital as a result of activity under its stock compensation plan and the related income tax effects ( 469 ) ( 182 ) ( 3,023 ) ( 2,790 )

Total effect of changes in ownership interest on equity (loss) attributable to Shake Shack Inc.

Decrease in additional paid-in capital as a result of activity under stock compensation plan ( 5,577 ) ( 2,699 )

Total effect of changes in ownership interest on loss attributable to Shake Shack Inc.

$ ( 3,252 ) $ ( 4,043 )

Shake Shack Inc.

Form 10-Q | 19

The following table summarizes the LLC Interests activity:

Thirteen Weeks Ended Thirty-Nine Weeks Ended

2023 September 28

2022 September 27

2023 September 28

Thirteen Weeks Ended

2024 March 29

LLC Interests activity under the Company's stock compensation plan

9 unchanged sentences

Shares of Class B common stock surrendered and canceled 33,500 25,000

Shake Shack Inc.

Form 10-Q | 17

EQUITY-BASED COMPENSATION

A summary of equity-based compensation expense by award type was as follows:

Thirteen Weeks Ended Thirty-Nine Weeks Ended

2023 September 28

2022 September 27

2023 September 28

Thirteen Weeks Ended

2024 March 29

Performance stock units $ 783 $ 1,310

3 unchanged sentences

Equity-based compensation expense recognized was as follows:

Thirteen Weeks Ended Thirty-Nine Weeks Ended

2023 September 28

2022 September 27

2023 September 28

Thirteen Weeks Ended

2024 March 29

General and administrative expenses $ 3,316 $ 3,529

1 unchanged sentence

Equity-based compensation expense $ 3,642 $ 3,802

20 | Shake Shack Inc.

Shake Shack is the sole managing member of SSE Holdings and, as a result, consolidates the financial results of SSE Holdings.

7 unchanged sentences

The Company is also subject to withholding taxes in foreign jurisdictions.

The 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.

The 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.

The 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.

The Company's 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.

Effective Income Tax Rates

The following table presents the Company’s effective income tax rates:

Thirteen Weeks Ended

2024 March 29

Effective income tax rates 19.0 % ( 114.8 ) %

The increase in the effective income tax rate for the thirteen weeks ended March 27, 2024 was primarily driven by the change in pre-tax income for the period compared to a pre-tax loss for the same period last year and the impact of discrete items which had a disproportionate effect on the minimal pre-tax loss in the prior year.

Additionally, an increase in the Company's ownership interest in SSE Holdings increases its share of the taxable income (loss) of SSE Holdings.

18 | Shake Shack Inc.

The Company's weighted average ownership interest in SSE Holdings was as follows:

Thirteen Weeks Ended

2024 March 29

Shake Shack's weighted average ownership percentages

93.3 % 93.2 %

Deferred Tax Assets and Liabilities

During the thirty-nine weeks ended September 27, 2023, the Company acquired an aggregate of 181,270 LLC Interests in connection with the redemption of LLC Interests and activity relating to its stock compensation plan.

The Company recognized a deferred tax asset in the amount of $ 48 associated with the basis difference in its investment in SSE Holdings upon acquisition of these LLC Interests.

As of September 27, 2023, the total deferred tax asset related to the basis difference in the Company's investment in SSE Holdings was $ 83,023 .

During the thirty-nine weeks ended September 27, 2023, the Company also recognized $ 200 of deferred tax assets related to additional tax basis increases generated from expected future payments under the Tax Receivable Agreement and related deductions for imputed interest on such payments.

The Company acquires LLC Interests in connection with the redemption of LLC Interests and activity relating to its stock compensation plan and recognizes deferred tax assets associated with the basis difference in its investment in SSE Holdings upon acquisition of these LLC Interests.

The following table summarizes the LLC Interests acquired by the Company:

Thirteen Weeks Ended

2024 March 29

LLC Interests activity under the Company's stock compensation plan 127,567 94,907

LLC Interests activity from redemptions of LLC Interests 33,500 25,000

Total LLC Interests acquired by the Company

161,067 119,907

Deferred tax assets related to the basis difference in the Company's investment in SSE Holdings were as follows:

Thirteen Weeks Ended

2024 March 29

Deferred tax assets recognized upon acquisition of LLC Interests

$ 3,314 $ 824

2024 December 27

Total deferred tax assets related to the acquisition of LLC Interests

$ 95,228 $ 90,419

The Company also recognizes deferred tax assets related to additional tax basis increases generated from expected future payments under the Tax Receivable Agreement and related deductions for imputed interest on such payments.

Refer to "Tax Receivable Agreement," herein for additional information.

Thirteen Weeks Ended

2024 March 29

Deferred tax assets recognized under the Tax Receivable Agreement

The Company evaluates the realizability of its deferred tax assets on a quarterly basis and establishes valuation allowances when it is more likely than not that all or a portion of a deferred tax asset may not be realized.

As of September 27, 2023, the Company concluded, based on the weight of all available positive and negative evidence, that all of its deferred tax assets (except for those deferred tax assets relating to certain state tax credits and net operating losses and certain foreign tax credits) are more likely than not to be realized.

As of March 27, 2024, the Company concluded, based on the weight of all available positive and negative evidence, that all of its deferred tax assets (except for those deferred tax assets relating to certain state tax credits and net operating losses) are more likely than not to be realized.

As such, no additional valuation allowance was recognized.

Tax Receivable Agreement

On February 4, 2015, the Company entered into a tax receivable agreement with certain of the then-existing members of SSE Holdings (the "Tax Receivable Agreement") that provides for the payment by the Company of 85 % of the amount of any tax benefits that are actually realized, or in some cases are deemed to realize, as a result of (i) increases in the Company's share of the tax basis in the net assets of SSE Holdings resulting from any redemptions or exchanges of LLC Interests, (ii) tax basis

Shake Shack Inc.

Form 10-Q | 19

increases attributable to payments made under the Tax Receivable Agreement, and (iii) deductions attributable to imputed interest pursuant to the Tax Receivable Agreement (the "TRA Payments").

The Company expects to benefit from the remaining 15 % of any tax benefits that may actually realize.

The TRA Payments are not conditioned upon any continued ownership interest in SSE Holdings or the Company.

The rights of each member of SSE Holdings that is a party to the Tax Receivable Agreement, are assignable to transferees of their respective LLC Interests.

Pursuant to the Company's election under Section 754 of the Internal Revenue Code (the "Code"), the Company expects to obtain an increase in its share of the tax basis in the net assets of SSE Holdings when LLC Interests are redeemed or exchanged by the other members of SSE Holdings.

4 unchanged sentences

They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

Shake Shack Inc.

Form 10-Q | 21

benefits that are actually realized, or in some cases are deemed to realize, as a result of (i) increases in the Company's share of the tax basis in the net assets of SSE Holdings resulting from any redemptions or exchanges of LLC Interests, (ii) tax basis increases attributable to payments made under the Tax Receivable Agreement, and (iii) deductions attributable to imputed interest pursuant to the Tax Receivable Agreement (the "TRA Payments").

The Company expects to benefit from the remaining 15 % of any tax benefits that may actually realize.

The TRA Payments are not conditioned upon any continued ownership interest in SSE Holdings or the Company.

The rights of each member of SSE Holdings that is a party to the Tax Receivable Agreement, are assignable to transferees of their respective LLC Interests.

During the thirty-nine weeks ended September 27, 2023, the Company acquired an aggregate of 35,000 LLC Interests in connection with the redemption of LLC Interests, which resulted in an increase in the tax basis of its investment in SSE Holdings subject to the provisions of the Tax Receivable Agreement.

The Company recognized an additional liability in the amount of $ 721 for the TRA Payments due to the redeeming members, representing 85 % of the aggregate tax benefits the Company expects to realize from the tax basis increases related to the redemption of LLC Interests, after concluding it was probable that such TRA Payments would be paid based on estimates of future taxable income.

During the thirty-nine weeks ended September 27, 2023 and September 28, 2022, inclusive of interest, no payments were made to the parties to the Tax Receivable Agreement.

As of September 27, 2023, the total amount of TRA Payments due under the Tax Receivable Agreement, was $ 235,614 .

Refer to Note 13, Commitments and Contingencies, for additional information relating to the liabilities under the Tax Receivable Agreement.

There were no transactions subject to the Tax Receivable Agreement for which the Company did not recognize the related liability, as the Company concluded that it would have sufficient future taxable income to utilize all of the related tax benefits generated by all transactions that occurred during the thirteen weeks ended March 27, 2024 and March 29, 2023.

A summary of obligations under the Tax Receivable Agreement were as follows:

Thirteen Weeks Ended

2024 March 29

Additional liabilities recognized under the Tax Receivable Agreement

$ 1,115 $ 472

2024 December 27

Total obligations under the Tax Receivable Agreement

$ 236,728 $ 235,613

During the thirteen weeks ended March 27, 2024 and March 29, 2023, inclusive of interest, no payments were made to the parties to the Tax Receivable Agreement.

EARNINGS (LOSS) PER SHARE

3 unchanged sentences

by the weighted average number of shares of Class A common stock outstanding, adjusted to give effect to potentially dilutive securities.

20 | Shake Shack Inc.

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings (loss) per share of Class A common stock (in thousands, except per share amounts):

Thirteen Weeks Ended Thirty-Nine Weeks Ended

2023 September 28

2022 September 27

2023 September 28

Thirteen Weeks Ended

2024 March 29

Net income (loss) attributable to Shake Shack Inc.—basic $ 2,040 $ ( 1,534 )

Reallocation of net income attributable to non-controlling interests from the assumed conversion of Class B shares 509 — 696 —

Net income (loss) attributable to Shake Shack Inc.—diluted $ 2,040 $ ( 1,534 )

5 unchanged sentences

Convertible Notes 1,467 —

Shares of Class B common stock 2,837 — 2,845 —

Weighted average shares of Class A common stock outstanding—diluted 41,259 39,332

1 unchanged sentence

Earnings (loss) per share of Class A common stock—diluted $ 0.05 $ ( 0.04 )

22 | Shake Shack Inc.

The effect of potential share settlement of the Convertible Notes outstanding for the period is included as potentially dilutive shares of Class A common stock under application of the if-converted method in the computation of diluted earnings (loss) per share, except when the effect would be anti-dilutive.

4 unchanged sentences

The following table presents potentially dilutive securities excluded from the computations of diluted earnings (loss) per share of Class A common stock:

Thirteen Weeks Ended Thirty-Nine Weeks Ended

2023 September 28

2022 September 27

2023 September 28

Thirteen Weeks Ended

2024 March 29

Stock options — 128,656 (2)

4 unchanged sentences

(1) Number of securities outstanding at the end of the period that were excluded from the computation of diluted earnings (loss) per share of Class A common stock because the performance conditions associated with these awards were not met assuming the end of the reporting period was the end of the performance period.

(2) Number of securities outstanding at the end of the period that were excluded from the computation of diluted loss per share of Class A common stock because the effect would have been anti-dilutive.

(2) Number of securities outstanding at the end of the period that were excluded from the computation of diluted earnings (loss) per share of Class A common stock because the effect would have been anti-dilutive.

Shake Shack Inc.

Form 10-Q | 21

SUPPLEMENTAL CASH FLOW INFORMATION

The following table sets forth supplemental cash flow information:

Thirty-Nine Weeks Ended

2023 September 28

Thirteen Weeks Ended

2024 March 29

Cash paid for:

6 unchanged sentences

Establishment of liabilities under Tax Receivable Agreement

Shake Shack Inc.

Form 10-Q | 23

COMMITMENTS AND CONTINGENCIES

4 unchanged sentences

Certain leases require the Company to obtain letters of credit.

As of September 27, 2023, the Company held two letters of credit, one for $ 130 which expires in February 2026 and the second for $ 603 , which expires in August 2023 and renews automatically for one-year periods through January 2034.

As of March 27, 2024, the Company held three letters of credit, one for $ 402 , which expires in August 2024 and renews automatically for one-year periods through January 2034, one for $ 163 , which expires in December 2024 and renews automatically for one-year periods through December 2029 and one for $ 130 which expires in February 2026.

Purchase Commitments

4 unchanged sentences

The Company is subject to various legal proceedings, claims and liabilities, involving employees and guests alike, which arise in the ordinary course of business and are generally covered by insurance.

As of September 27, 2023, the amount of the ultimate liability with respect to these matters was not material.

As of March 27, 2024, the amount of the ultimate liability with respect to these matters was not material.

Liabilities under Tax Receivable Agreement

As described in Note 10, Income Taxes, the Company is a party to the Tax Receivable Agreement under which it is contractually committed to pay certain of the members of SSE Holdings 85 % of the amount of any tax benefits that are actually realized, or in some cases are deemed to realize, as a result of certain transactions.

The Company is a party to the Tax Receivable Agreement under which it is contractually committed to pay certain of the members of SSE Holdings 85 % of the amount of any tax benefits that are actually realized, or in some cases are deemed to realize, as a result of certain transactions.

The Company is not obligated to make any payments under the Tax Receivable Agreement until the tax benefits associated with the transactions that gave rise to the payments are realized.

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.

Amounts payable under the Tax Receivable Agreement are

22 | Shake Shack Inc.

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.

If the Company does not generate sufficient taxable income in the aggregate over the term of the Tax Receivable Agreement to utilize the tax benefits, then it would not be required to make the related TRA Payments.

During the thirty-nine weeks ended September 27, 2023 and September 28, 2022, the Company recognized liabilities totaling $ 721 and $ 847 , respectively, relating to the obligations under the Tax Receivable Agreement, after concluding that it was probable that it would have sufficient future taxable income over the term of the Tax Receivable Agreement to utilize the related tax benefits.

As of September 27, 2023 and December 28, 2022, the total obligations under the Tax Receivable Agreement were $ 235,614 and $ 234,893 , respectively.

The Company recognizes liabilities relating to the obligations under the Tax Receivable Agreement if concluding that it is probable that it would have sufficient future taxable income over the term of the Tax Receivable Agreement to utilize the related tax benefits.

Refer to Note 10, Income Taxes, for additional information relating to the Tax Receivable Agreement.

RELATED PARTY TRANSACTIONS

2 unchanged sentences

As a result, Union Square Hospitality Group, LLC and its subsidiary, set forth below, are considered related parties.

24 | Shake Shack Inc.

Hudson Yards Sports and Entertainment

4 unchanged sentences

HYC also pays a percentage of profits on sales of branded beverages, as defined in the MLA.

Thirteen Weeks Ended Thirty-Nine Weeks Ended

Classification September 27

2023 September 28

2022 September 27

2023 September 28

Thirteen Weeks Ended

Classification March 27

2024 March 29

Amounts received from HYC Licensing revenue $ 98 $ 146

Classification September 27

Classification March 27

2024 December 27

2 unchanged sentences

The Chairman of the Board of Directors serves as a director of the Madison Square Park Conservancy ("MSP Conservancy"), with which Shake Shack has a license agreement and pays license fees to operate the Madison Square Park Shack.

No amounts were due to MSP Conservancy as of September 27, 2023 and December 28, 2022.

Thirteen Weeks Ended Thirty-Nine Weeks Ended

Classification September 27

2023 September 28

2022 September 27

2023 September 28

No amounts were due to MSP Conservancy as of March 27, 2024 and December 27, 2023.

Thirteen Weeks Ended

Classification March 27

2024 March 29

Amounts paid to MSP Conservancy Occupancy and related expenses $ 229 $ 224

The Chairman of the Board of Directors serves as a director of Olo, Inc.

(formerly known as "Mobo Systems, Inc."), a platform the Company uses in connection with its mobile ordering application.

Thirteen Weeks Ended Thirty-Nine Weeks Ended

Classification September 27

2023 September 28

2022 September 27

2023 September 28

The Chairman of the Board of Directors serves as a director of Olo, Inc., a platform the Company uses in connection with its mobile ordering application.

Thirteen Weeks Ended

Classification March 27

2024 March 29

Amounts paid to Olo, Inc.

Other operating expenses $ 181 $ 124

Classification September 27

Shake Shack Inc.

Form 10-Q | 23

Classification March 27

2024 December 27

5 unchanged sentences

The Company currently uses certain point-of-sale applications, payment processing services, hardware and other enterprise platform services in connection with its kiosk technology, sales for certain off-site events and the processing of a limited amount of sales at certain locations.

Shake Shack Inc.

Form 10-Q | 25

Thirteen Weeks Ended Thirty-Nine Weeks Ended

Classification September 27

2023 September 28

2022 September 27

2023 September 28

Thirteen Weeks Ended

Classification March 27

2024 March 29

Amounts paid to Block, Inc.

Other operating expenses $ 2,705 $ 1,571

Classification September 27

Classification March 27

2024 December 27

5 unchanged sentences

Refer to Note 10, Income Taxes, for additional information.

No payments were made to the members of SSE Holdings pursuant to the Tax Receivable Agreement during the thirty-nine weeks ended September 27, 2023 and September 28, 2022.

Classification September 27

No payments were made to the members of SSE Holdings pursuant to the Tax Receivable Agreement during the thirteen weeks ended March 27, 2024 and March 29, 2023.

Classification March 27

2024 December 27

3 unchanged sentences

Under the terms of the SSE Holdings LLC Agreement, SSE Holdings is obligated to make tax distributions to its members.

No tax distributions were payable to non-controlling interest holders as of September 27, 2023 and December 28, 2022, respectively.

Thirteen Weeks Ended Thirty-Nine Weeks Ended

Classification September 27

2023 September 28

2022 September 27

2023 September 28

No tax distributions were payable to non-controlling interest holders as of March 27, 2024 and December 27, 2023, respectively.

Thirteen Weeks Ended

Classification March 27

2024 March 29

Amounts paid to non-controlling interest holders Non-controlling interests $ 145 $ 49

24 | Shake Shack Inc.

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 1. Financial Statements