What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-03 compared with 2023-11-03 · 196 added, 296 removed, 272 unchanged (64% of the section changed)

4 unchanged sentences

You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts.

These statements may include words such as "aim," "anticipate," "believe," "estimate," "expect," "forecast," "future," "intend," "outlook," "potential," "project," "projection," "plan," "seek," "may," "could," "would," "will," "should," "can," "can have," "likely," the negatives thereof and other similar expressions.

These statements may include words such as "aim," "anticipate," "believe," "estimate," "expect," "forecast," "future," "intend," "likely," "outlook," "potential," "project," "projection," "plan," "seek," "may," "could," "would," "will," "should," "can," "can have," the negatives thereof and other similar expressions.

All forward-looking statements are expressly qualified in their entirety by these cautionary statements.

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 27, 2023 ("2023 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.

4 unchanged sentences

Unless otherwise stated, references to particular years, quarters, months or periods refer to our fiscal years and the associated quarters, months and periods of those fiscal years.

Shake Shack serves modern, fun and elevated versions of American classics using only the best ingredients.

Shake Shack serves modern, fun and elevated versions of American classics using only premium ingredients.

We are known for our made-to-order 100% Angus beef burgers, crispy chicken, hand-spun milkshakes, house-made lemonades, beer, wine, and more.

Our fine dining roots and commitment to community building, hospitality and the sourcing of premium ingredients is what we call "fine casual." Fine casual couples the ease, value and convenience of fast casual concepts with the high standards of excellence grounded in our fine dining roots — thoughtful ingredient sourcing and preparation, hospitality and quality.

Our mission is to Stand For Something Good in all aspects of our business, including the exceptional team we hire and train, the premium ingredients making up our menu, our community engagement and the design of our Shacks.

With our fine-dining roots and a commitment to crafting uplifting experiences, Shake Shack has become a cult-brand and created a new category, fine-casual.

Our mission is to Stand For Something Good in all aspects of our business, including the talented team we hire and train, the premium ingredients making up our menu, our community engagement and the design of our Shacks.

Stand For Something Good is a call to action for all of our stakeholders — our team, guests, communities, suppliers and investors — and we actively invite them all to share in this philosophy with us.

3 unchanged sentences

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.

"Same-Shack sales" represents Shack sales for the comparable Shack base, which is defined as the number of 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.

“System-wide sales” is an operating measure and consists of sales from Company-operated Shacks and 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 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.

Of these amounts, revenue is limited to licensing

Shake Shack Inc.

Form 10-Q | 25

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.

revenue based on a percentage of sales from licensed Shacks, as well as certain up-front fees, such as territory fees and opening fees.

Key Operating Metrics

Same-Shack sales for the thirteen weeks ended March 27, 2024 increased 1.6% compared to the same period last year, driven by a 3.7% increase in price mix partially offset by a 2.1% decrease in guest traffic.

For the purpose of calculating same-Shack sales for the thirteen weeks ended March 27, 2024, Shack sales for 224 Shacks were included in the comparable Shack base.

Average weekly sales were $73,000 for the thirteen weeks ended March 27, 2024, which was flat compared to the same period last year, primarily driven by higher menu prices, partially offset by a decline in guest traffic.

System-wide sales for the thirteen weeks ended March 27, 2024 increased 12.3% to $443.3 million compared to the same period last year.

Digital sales for the thirteen weeks ended March 27, 2024 increased 15.3% to $103.2 million compared to the same period last year.

Digital sales includes orders placed on the Shake Shack app, website and third-party delivery platforms, which represented 36.8% of Shack sales during the thirteen weeks ended March 27, 2024.

Development Highlights

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.

During the thirteen weeks ended March 27, 2024, we opened four new Company-operated Shacks and four new licensed Shacks.

There was one permanent licensed Shack closure in the first quarter of 2024.

The following table presents the Shacks opened during the thirteen weeks ended March 27, 2024:

Location Type Opening Date

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

Nanjing, China — Nanjing IFC Licensed 1/3/2024

North Brunswick Township, NJ — North Brunswick Company-operated 1/10/2024

Seoul, Korea — Yeouido Licensed 1/12/2024

Vienna, VA — Pike 7 Company-operated 2/20/2024

Tel Aviv, Israel — Dizengoff Licensed 2/27/2024

Santa Rosa, CA — Montgomery Village Company-operated 2/28/2024

Bloomingdale, IL — Bloomingdale Company-operated 3/7/2024

Muharraq, Bahrain — Marassi Galleria Mall Licensed 3/14/2024

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.

26 | Shake Shack Inc.

RESULTS OF OPERATIONS

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

The following table summarizes our results of operations for the thirteen weeks ended March 27, 2024 and March 29, 2023:

Thirteen Weeks Ended

(dollar amounts in thousands) March 27

2024 March 29

Shack sales $ 280,552 96.6 % $ 244,254 96.4 %

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Labor and related expenses 81,509 29.1 % 74,264 30.4 %

76,233 28.8 % 64,638 29.4 % 225,655 29.3 % 190,954 29.9 %

Other operating expenses 41,856 14.9 % 34,936 14.3 %

1 unchanged sentence

General and administrative expenses 35,944 12.4 % 31,311 12.4 %

30,939 11.2 % 26,931 11.8 % 93,726 11.7 % 87,804 13.3 %

Depreciation and amortization expense 25,441 8.8 % 21,322 8.4 %

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INCOME (LOSS) BEFORE INCOME TAXES 2,732 0.9 % (755) (0.3) %

Income tax expense (benefit) 529 0.2 % (1,508) (0.7) % 1,743 0.2 % (5,098) (0.8) %

Income tax expense 518 0.2 % 867 0.3 %

NET INCOME (LOSS) 2,214 0.8 % (1,622) (0.6) %

3 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 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 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 represent the aggregate sales of food, beverages and Shake Shack branded merchandise at our 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 Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Thirteen Weeks Ended

(dollar amounts in thousands) March 27

2024 March 29

Shack sales $ 280,552 $ 244,254

Percentage of Total revenue

96.6 % 96.4 %

Dollar change compared to prior year $ 36,298

Percentage change compared to prior year 14.9 %

Shack sales for the thirteen weeks ended March 27, 2024 increased 14.9% to $280.6 million versus the same period last year.

The increase was primarily due to the opening of 39 new Company-operated Shacks between March 29, 2023 and March 27, 2024 which contributed $34.5 million and an increase in menu prices partially offset by a decline in guest traffic.

Shake Shack Inc.

Form 10-Q | 27

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

Licensing revenue is comprised of license fees, opening fees for certain licensed Shacks and territory fees.

Licensing revenue is comprised of license fees and opening and territory fees for certain licensed Shacks.

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 Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Thirteen Weeks Ended

(dollar amounts in thousands) March 27

2024 March 29

Licensing revenue $ 9,952 $ 9,024

2 unchanged sentences

Percentage change compared to prior year 10.3 %

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.

Licensing revenue for the thirteen weeks ended March 27, 2024 increased 10.3% to $10.0 million versus the same period last year.

The increase was primarily due to the opening of 37 net new licensed Shacks between March 29, 2023 and March 27, 2024 which contributed $1.6 million to Licensing revenue, partially offset by a decline in sales at existing licensed Shacks, primarily in China and the Middle East.

Food and Paper Costs

Food and paper costs include the direct costs associated with food, beverage and packaging of our menu items.

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 Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

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

Thirteen Weeks Ended

(dollar amounts in thousands) March 27

2024 March 29

Food and paper costs $ 80,253 $ 71,772

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Percentage change compared to prior year 11.8 %

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.

Food and paper costs for the thirteen weeks ended March 27, 2024 increased 11.8% to $80.3 million versus the same period last year.

The increase was primarily due to the opening of 39 new Company-operated Shacks between March 29, 2023 and March 27, 2024, which contributed approximately $9.0 million.

As a percentage of Shack sales, the decrease in Food and paper costs for the thirteen weeks ended March 27, 2024 was primarily driven by menu price increases partially offset by the increases in commodities costs, mainly beef and fries and increases in marketing promotions.

Labor and Related Expenses

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.

Labor and related expenses include Company-operated Shack-level hourly and management wages, 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 Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

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 Company-operated Shacks.

28 | Shake Shack Inc.

Thirteen Weeks Ended

(dollar amounts in thousands) March 27

2024 March 29

Labor and related expenses $ 81,509 $ 74,264

2 unchanged sentences

Percentage change compared to prior year 9.8 %

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.

Labor and related expenses for the thirteen weeks ended March 27, 2024 increased 9.8% to $81.5 million versus the same period last year.

The increase was primarily due to the opening of 39 new Company-operated Shacks between March 29, 2023 and March 27, 2024.

As a percentage of Shack sales, the decrease in Labor and related expenses for the thirteen weeks ended March 27, 2024 was primarily due to labor efficiencies partially offset by additional expenses from the opening of 39 new Company-operated Shacks between March 29, 2023 and March 27, 2024.

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 Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

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

Thirteen Weeks Ended

(dollar amounts in thousands) March 27

2024 March 29

Other operating expenses $ 41,856 $ 34,936

2 unchanged sentences

Percentage change compared to prior year 19.8 %

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

Other operating expenses for the thirteen weeks ended March 27, 2024 increased 19.8% to $41.9 million versus the same period last year.

The increase was primarily driven by higher facilities costs, mainly professional services, due to the opening of 39 new Company-operated Shacks between March 29, 2023 and March 27, 2024, as well as increases in transaction fees associated with higher sales and marketing costs.

As a percentage of Shack sales, the increase in Other operating expenses for the thirteen weeks ended March 27, 2024 was primarily due to increases in delivery commissions associated with higher delivery sales and marketing spend, partially offset by lower utility costs.

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 Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Thirteen Weeks Ended

(dollar amounts in thousands) March 27

2024 March 29

Occupancy and related expenses $ 22,188 $ 18,583

2 unchanged sentences

Percentage change compared to prior year 19.4 %

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.

Shake Shack Inc.

Form 10-Q | 29

Occupancy and related expenses for the thirteen weeks ended March 27, 2024 increased 19.4% to $22.2 million versus the same period last year.

The increase was primarily due to the opening of 39 new Company-operated Shacks between March 29, 2023 and March 27, 2024.

As a percentage of Shack sales, the increase in Occupancy and related expenses for the thirteen weeks ended March 27, 2024 were primarily due to higher variable rent and occupancy taxes.

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 Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Thirteen Weeks Ended

(dollar amounts in thousands) March 27

2024 March 29

General and administrative expenses $ 35,944 $ 31,311

2 unchanged sentences

Percentage change compared to prior year 14.8 %

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.

General and administrative expenses for the thirteen weeks ended March 27, 2024 increased 14.8% to $35.9 million versus the same period last year.

The increase was primarily due to increases in wages and other team costs to support our Shack growth, costs related to the restatement of prior periods included in the fiscal 2023 Form 10-K, professional fees related to non-recurring matters, as well as investments in marketing and technology initiatives, partially offset by the absence of one-time legal settlements compared to the prior year period.

As a percentage of Total revenue, General and administrative expenses was flat at 12.4% for the thirteen weeks ended March 27, 2024 and March 29, 2023, which was primarily due to sales leverage partially offset by the aforementioned items.

Depreciation and Amortization Expense

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

Thirteen Weeks Ended Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Thirteen Weeks Ended

(dollar amounts in thousands) March 27

2024 March 29

Depreciation and amortization expense $ 25,441 $ 21,322

2 unchanged sentences

Percentage change compared to prior year 19.3 %

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.

Depreciation and amortization expense for the thirteen weeks ended March 27, 2024 increased 19.3% to $25.4 million versus the same period last year.

The increase was predominantly due to incremental depreciation of capital expenditures related to the opening of 39 new Company-operated Shacks and technology projects placed into service between March 29, 2023 and March 27, 2024.

Pre-Opening Costs

Pre-opening costs consist primarily of occupancy, manager and team member wages, cookware, travel and lodging costs for our opening training team and other supporting team members, marketing expenses, legal fees and inventory costs incurred prior to the opening of a Shack.

All such costs incurred prior to the opening of a domestic Company-operated Shack are expensed in the period in which the expense was incurred.

Pre-opening costs can fluctuate significantly from period to period, based on the number and timing of domestic Company-operated Shack openings and the specific pre-opening costs incurred for each domestic Company-operated Shack.

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 Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

All such costs incurred prior to the opening of a Company-operated Shack are expensed in the period in which the expense was incurred.

Pre-opening costs can fluctuate significantly from period to period, based on the number and timing of Company-operated Shack openings and the specific pre-opening costs incurred for each Company-operated Shack.

Additionally, Company-operated Shack openings in new geographic markets may initially experience higher pre-opening costs

30 | Shake Shack Inc.

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

(dollar amounts in thousands) March 27

2024 March 29

Pre-opening costs $ 2,753 $ 3,557

2 unchanged sentences

Percentage change compared to prior year (22.6) %

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.

Pre-opening costs for the thirteen weeks ended March 27, 2024 decreased 22.6% to $2.8 million versus the same period last year.

The decrease was primarily due to a reduction in wages and team costs as we standardize the training process for unopened Shacks partially offset by an increase in legal costs.

Impairment and Loss on Disposal of Assets

Impairment and loss on disposal of assets consist of impairment charges related to our long-lived assets, which includes property and equipment, as well as operating and finance lease assets.

Additionally, Impairment and loss on disposal of assets includes

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 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 primarily consists of impairment charges related to our long-lived assets, which includes property and equipment, as well as operating and finance lease assets.

Additionally, Impairment and loss on disposal of assets includes 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

(dollar amounts in thousands) March 27

2024 March 29

Impairment and loss on disposal of assets $ 526 $ 722

2 unchanged sentences

Percentage change compared to prior year (27.1) %

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.

Impairment and loss on disposal of assets for the thirteen weeks ended March 27, 2024 decreased 27.1% to $0.5 million versus the same period last year.

The decrease was primarily due to a decrease in abandoned construction projects partially offset by an increase in costs to replace certain equipment.

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 Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Other income, net consists primarily of interest income, adjustments to liabilities under the Tax Receivable Agreement, dividend income, and net unrealized and realized gains and losses from marketable securities.

Thirteen Weeks Ended

(dollar amounts in thousands) March 27

2024 March 29

Other income, net $ 3,206 $ 2,837

2 unchanged sentences

Percentage change compared to prior year 13.0 %

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.

Other income, net for the thirteen weeks ended March 27, 2024 increased from $2.8 million to $3.2 million versus the same period last year.

The increase was primarily due to an increase in interest income related to investments in marketable securities.

Shake Shack Inc.

Form 10-Q | 31

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 Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Thirteen Weeks Ended

(dollar amounts in thousands) March 27

2024 March 29

Interest expense $ (508) $ (403)

2 unchanged sentences

Percentage change compared to prior year 26.1 %

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.

Income Tax Expense (Benefit)

Interest expense for the thirteen weeks ended March 27, 2024 increased 26.1% to $0.5 million versus the same period last year.

The increase was primarily due to increased finance lease charges from the opening of 39 new Company-operated Shacks between March 29, 2023 and March 27, 2024.

Income Tax Expense

We are the sole managing member of SSE Holdings, and as a result, consolidate the financial results of SSE Holdings.

7 unchanged sentences

We are also subject to withholding taxes in foreign jurisdictions.

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)

Thirteen Weeks Ended

(dollar amounts in thousands) March 27

2024 March 29

Income tax expense $ 518 $ 867

Percentage of Total revenue 0.2 % 0.3 %

1 unchanged sentence

Percentage change compared to prior year (40.3) %

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 93.2% 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 thirty-nine weeks ended September 27, 2023 and September 28, 2022, respectively.

Our effective income tax rates for the thirteen weeks ended March 27, 2024 and March 29, 2023 were 19.0% and (114.8)%, respectively.

The increase 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.

Our weighted-average ownership interest in SSE Holdings was 93.3% and 93.2%, respectively, for the thirteen weeks ended March 27, 2024 and March 29, 2023.

Net Income (Loss) Attributable to Non-controlling Interests

5 unchanged sentences

and the non-controlling interest holders.

Thirteen Weeks Ended Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

32 | Shake Shack Inc.

Thirteen Weeks Ended

(dollar amounts in thousands) March 27

2024 March 29

Net income (loss) attributable to non-controlling interests $ 174 $ (88)

Percentage of Total revenue 0.1 % — %

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.

Net income (loss) attributable to non-controlling interests for the thirteen weeks ended March 27, 2024 improved to income of $0.2 million from a loss of $0.1 million in the same period last year.

The improvement for the thirteen weeks ended March 27, 2024 was primarily due to improved net results compared to the same period last year, partially offset by a decrease in the non-controlling interest holders' weighted average ownership, which was 6.7% and 6.8%, respectively for the thirteen weeks ended March 27, 2024 and March 29, 2023.

NON-GAAP FINANCIAL MEASURES

To supplement the Condensed Consolidated Financial Statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"), we use the following non-GAAP financial measures:

Shack-level operating profit, Shack-level operating profit margin, EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted pro forma net income (loss) and adjusted pro forma earnings (loss) per fully exchanged and diluted share (collectively the "non-GAAP financial measures").

Shack-Level Operating Profit

Shack-level operating profit, also referred to as restaurant profit, is defined as Shack sales less Shack-level operating expenses including Food and paper costs, Labor and related expenses, Other operating expenses and Occupancy and related expenses.

Restaurant-level profit, Restaurant-level profit margin, EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted pro forma net income (loss) and adjusted pro forma earnings (loss) per fully exchanged and diluted share (collectively the "non-GAAP financial measures").

Restaurant-Level Profit

Restaurant-level profit, formerly referred to as Shack-level operating profit, is defined as Shack sales less Shack-level operating expenses which include Food and paper costs, Labor and related expenses, Other operating expenses and Occupancy and related expenses.

How This Measure Is Useful

When used in conjunction with GAAP financial measures, Shack-level operating profit and Shack-level operating profit margin are supplemental measures of operating performance that we believe are useful measures to evaluate the performance and profitability of our Shacks.

Additionally, Shack-level operating profit and Shack-level operating profit margin are key metrics used internally by our management to develop internal budgets and forecasts, as well as assess the performance of our Shacks relative to budget and against prior periods.

When used in conjunction with GAAP financial measures, Restaurant-level profit and Restaurant-level profit margin are supplemental measures of operating performance that we believe are useful measures to evaluate the performance and profitability of our Shacks.

Additionally, Restaurant-level profit and Restaurant-level profit margin are key metrics used internally by our management to develop internal budgets and forecasts, as well as assess the performance of our Shacks relative to budget and against prior periods.

It is also used to evaluate team member compensation as it serves as a metric in certain of our performance-based team member bonus arrangements.

We believe presentation of Shack-level operating profit and Shack-level operating profit margin provides investors with a supplemental view of our operating performance that can provide meaningful insights to the underlying operating performance of our Shacks, as these measures depict the operating results that are directly impacted by our Shacks and exclude items that may not be indicative of, or are unrelated to, the ongoing operations of our Shacks.

We believe the presentation of Restaurant-level profit and Restaurant-level profit margin provides investors with a supplemental view of our operating performance that can provide meaningful insights to the underlying operating performance of our Shacks, as these measures depict the operating results that are directly impacted by our Shacks and exclude items that may not be indicative of, or are unrelated to, the ongoing operations of our Shacks.

It may also assist investors to evaluate our performance relative to peers of various sizes and maturities and provides greater transparency with respect to how our management evaluates our business, as well as our financial and operational decision-making.

Limitations of the Usefulness of this Measure

Shack-level operating profit and Shack-level operating profit margin may differ from similarly titled measures used by other companies due to different methods of calculation.

Presentation of Shack-level operating profit and Shack-level operating profit margin is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

Shack-level operating profit excludes certain costs, such as General and administrative expenses and Pre-opening costs, which are considered normal, recurring cash operating expenses and are essential to support the operation and development of our Shacks.

Therefore, this measure may not provide a complete understanding of the operating results of our Company as a whole and Shack-level operating profit and Shack-level operating profit margin should be reviewed in conjunction with our GAAP financial results.

A reconciliation of Shack-level operating profit to Income (loss) from Operations, the most directly comparable GAAP financial measure, is as follows.

Restaurant-level profit and Restaurant-level profit margin may differ from similarly titled measures used by other companies due to different methods of calculation.

Presentation of Restaurant-level profit and Restaurant-level profit margin is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

Restaurant-level profit excludes certain costs, such as General and administrative expenses and Pre-opening costs, which are considered normal, recurring cash operating expenses and are essential to support the operation and development of our Shacks.

Therefore, this measure may not provide a complete understanding of the operating results of our Company as a whole and Restaurant-level profit and Restaurant-level profit margin should be reviewed in conjunction with our GAAP financial results.

A reconciliation of Restaurant-level profit to Income (loss) from operations, the most directly comparable GAAP financial measure, is as follows.

Shake Shack Inc.

Thirteen Weeks Ended Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

Form 10-Q | 33

Thirteen Weeks Ended

(dollar amounts in thousands) March 27

2024 March 29

Income (loss) from operations $ 34 $ (3,189)

5 unchanged sentences

Impairment and loss on disposal of assets 526 722

Shack-level operating profit $ 53,960 $ 36,072 $ 153,601 $ 108,475

Restaurant-level profit

$ 54,746 $ 44,699

Total revenue $ 290,504 $ 253,278

1 unchanged sentence

Shack sales $ 280,552 $ 244,254

Shack-level operating profit margin (2,3)

Restaurant-level profit margin (1)

19.5 % 18.3 %

(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 thirty-nine weeks ended September 27, 2023.

(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.

(1) As a percentage of Shack sales.

EBITDA and Adjusted EBITDA

EBITDA is defined as Net income (loss) before Interest expense (net of interest income), Income tax expense (benefit) and Depreciation and amortization expense.

EBITDA is defined as Net income (loss) before Interest expense (net of interest income), Income tax expense and Depreciation and amortization expense.

Adjusted EBITDA is defined as EBITDA (as defined above) excluding equity-based compensation expense, Impairment and loss on disposal of assets, amortization of cloud-based software implementation costs, as well as certain non-recurring items that we do not believe directly reflect our core operations and may not be indicative of our recurring business operations.

In the first quarter of 2023, the Company revised its definition of Adjusted EBITDA to exclude deferred lease costs and executive transition costs as adjustments to the measure.

The Company believes excluding both of these items improves the usefulness of Adjusted EBITDA as these items are characteristic of the Company’s ongoing operations and such presentation is consistent with other companies in the restaurant industry.

Previously reported periods have been revised to conform to the current period presentation.

How These Measures Are Useful

2 unchanged sentences

We believe presentation of EBITDA and adjusted EBITDA provides investors with a supplemental view of our operating performance that facilitates analysis and comparisons of our ongoing business operations because they exclude items that may not be indicative of our ongoing operating performance.

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 Thirty-Nine Weeks Ended

(dollar amounts in thousands) September 27

2023 September 28

2022 September 27

2023 September 28

34 | Shake Shack Inc.

Thirteen Weeks Ended

(dollar amounts in thousands) March 27

2024 March 29

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

1 unchanged sentence

Interest expense, net (27) 403

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

Income tax expense 518 867

EBITDA $ 28,146 $ 20,970

3 unchanged sentences

Legal settlements (1)

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

CEO transition costs 479 —

Restatement costs (2)

Adjusted EBITDA $ 35,885 $ 27,565

1 unchanged sentence

12.4 % 10.9 %

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

(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.

(1) Expenses incurred to establish accruals related to the settlements of legal matters.

(2) Expenses incurred related to the restatement of prior periods in the 2023 Form 10-K.

(3) Expenses incurred for professional fees related to non-recurring matters.

(4) Calculated as a percentage of Total revenue, which was $290.5 million and $253.3 million for the thirteen weeks ended March 27, 2024 and March 29, 2023, respectively.

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

2 unchanged sentences

Adjusted pro forma earnings (loss) per fully exchanged and diluted share is calculated by dividing adjusted pro forma net income (loss) by the weighted average shares of Class A common stock outstanding, assuming the full exchange of all outstanding LLC Interests, after giving effect to the dilutive effect of outstanding equity-based awards.

In the first quarter of 2023, the Company revised its definition of Adjusted Pro Forma Net Income to exclude executive transition costs as an adjustment to the measure.

Previously reported periods have been revised to conform to the current period presentation.

See "EBITDA and Adjusted EBITDA" above for additional information.

How These Measures Are Useful

1 unchanged sentence

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

38 | Shake Shack Inc.

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 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

1 unchanged sentence

Presentation of adjusted pro forma net income (loss) and adjusted pro forma earnings (loss) per fully exchanged and diluted share should not be considered alternatives to Net income (loss) and earnings (loss) per share, as determined under GAAP.

While these measures are useful in evaluating our performance, they do not account for the earnings attributable to the non-controlling interest holders and therefore do not provide a complete understanding of the Net income (loss) attributable to Shake Shack Inc.

Adjusted pro forma net income (loss) and adjusted pro forma earnings (loss) per fully exchanged and diluted share should be evaluated in conjunction with our GAAP financial results.

A reconciliation of adjusted pro forma net income (loss) to Net income (loss) attributable to Shake Shack Inc., the most directly comparable GAAP measure, and the computation of adjusted pro forma earnings (loss) per fully exchanged and diluted share are set forth below.

While these measures are useful in

Shake Shack Inc.

Form 10-Q | 35

Thirteen Weeks Ended Thirty-Nine Weeks Ended

(in thousands, except per share amounts) September 27

2023 September 28

2022 September 27

2023 September 28

evaluating our performance, they do not account for the earnings attributable to the non-controlling interest holders and therefore do not provide a complete understanding of the Net income (loss) attributable to Shake Shack Inc.

Adjusted pro forma net income (loss) and adjusted pro forma earnings (loss) per fully exchanged and diluted share should be evaluated in conjunction with our GAAP financial results.

Thirteen Weeks Ended

(in thousands, except per share amounts) March 27

2024 March 29

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

$ 7,627 $ (2,024) $ 13,041 $ (13,374)

Reallocation of Net income (loss) attributable to non-controlling interests from the assumed exchange of LLC Interests (1)

509 (287) 696 (1,522)

Legal settlements — 1,004

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

Restatement costs (2)

CEO transition costs 479 —

Tax impact of above adjustments (4)

(810) (11) (2,146) (922)

Adjusted pro forma net income (loss) $ 5,623 $ (290)

1 unchanged sentence

Assumed exchange of LLC Interests for shares of Class A common stock (1)

— 2,871 — 2,899

Adjusted pro forma fully exchanged weighted-average shares of Class A common stock outstanding—diluted 44,089 42,184

Adjusted pro forma earnings (loss) per fully exchanged share—diluted $ 0.13 $ (0.01)

Thirteen Weeks Ended Thirty-Nine Weeks Ended

2023 September 28

2022 September 27

2023 September 28

Thirteen Weeks Ended

2024 March 29

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

Assumed exchange of LLC Interests for shares of Class A common stock (1)

Non-GAAP adjustments (5)

(0.02) (0.01) 0.03 0.10

Adjusted pro forma earnings (loss) per fully exchanged share—diluted $ 0.13 $ (0.01)

(1) Assumes the exchange of all outstanding LLC Interests for shares of Class A common stock, resulting in the elimination of the non-controlling interest and recognition of the net income (loss) attributable to non-controlling interests.

Refer to Note 11, Earnings (Loss) per Share, in the accompanying Condensed Consolidated Financial Statements , for additional information.

(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 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.

(2) Expenses incurred related to the restatement of prior periods in the 2023 Form 10-K.

(3) Expenses incurred for professional fees related to non-recurring matters.

(4) Represents the tax effect of the aforementioned adjustments and pro forma adjustments to reflect corporate income taxes at assumed effective tax rates of 2.8% and 133.1% for the thirteen weeks ended March 27, 2024 and March 29, 2023, respectively.

Amounts include provisions for U.S.

5 unchanged sentences

Sources and Uses of Cash

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

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

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

As of March 27, 2024, we maintained a Cash and cash equivalents balance of $260.2 million and a short-term investments balance of $24.6 million within Marketable securities.

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

As of March 27, 2024, such obligations totaled $236.7 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.

Thirty-Nine Weeks Ended

(in thousands) September 27

2023 September 28

Thirteen Weeks Ended

(in thousands) March 27

2024 March 29

Net cash provided by operating activities $ 30,665 $ 19,820

Net cash used in investing activities (126,264) (95,212)

Net cash provided by investing activities 11,307 46,462

Net cash used in financing activities (6,421) (3,369)

Effect of exchange rate changes on cash and cash equivalents

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

Net increase in Cash and cash equivalents 35,550 62,909

Cash and cash equivalents at beginning of period 224,653 230,521

3 unchanged sentences

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.

For the thirteen weeks ended March 27, 2024, net cash provided by operating activities was $30.7 million compared to $19.8 million for the thirteen weeks ended March 29, 2023, an increase of $10.8 million.

The increase was primarily driven by a $7.5 million improvement in net results after excluding non-cash charges as well as changes in working capital of $3.3 million.

The changes in working capital included an increase in liabilities related to general business operations as well as the timing and payments related to accruals and legal settlements, partially offset by a decrease in liabilities related to bonus arrangements.

Investing Activities

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.

For the thirteen weeks ended March 27, 2024, net cash provided by investing activities was $11.3 million compared to $46.5 million for the thirteen weeks ended March 29, 2023, an decrease of $35.2 million.

This decrease was primarily due to a net decrease in marketable securities activity as a result of the sale of equity securities of $81.5 million in the prior year, partially offset by maturities of held-to-maturity marketable securities in the current year of $44.4 million.

Financing Activities

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.

For the thirteen weeks ended March 27, 2024, net cash used in financing activities was $6.4 million compared to $3.4 million for the thirteen weeks ended March 29, 2023, an increase of $3.0 million.

This increase was primarily due to an increase in withholding taxes related to net settled equity awards.

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.

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:

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 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.

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

As of March 27, 2024, we were in compliance with all covenants.

Contractual Obligations

1 unchanged sentence

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,

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.

38 | Shake Shack Inc.

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.

14 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