UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June ~~24, 2020~~30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to ______

Commission file number: 001-36823

SHAKE SHACK INC.

(Exact name of registrant as specified in its charter)

Delaware

47-1941186

(State or other jurisdiction of

incorporation or organization)

(IRS Employer
Identification No.)

225 Varick Street

Suite 301

New York,

New York

10014

(Address of principal executive offices)

(Zip Code)

(646) 747-7200

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.001	SHAK	New York Stock Exchange

Indicate by check mark if the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule-405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☑ No

As of July ~~22, 2020,~~28, 2021, there were ~~38,237,019~~39,135,876 shares of Class A common stock outstanding and ~~3,117,002~~2,921,587 shares of Class B common stock outstanding.

SHAKE SHACK INC.

TABLE OF CONTENTS

Table of Contents

Cautionary Note Regarding Forward-Looking Information

This Quarterly Report on Form 10-Q ("Form 10-Q") contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"), which are subject to known and unknown risks, ~~including risks related to the COVID-19 outbreak,~~ uncertainties and other important factors that may cause actual results to be materially ~~different.~~different from the statements made herein. All statements other than statements of historical fact are forward-looking statements. ~~Many of the forward-looking statements are located in Part I, Item 2 of this Form 10-Q under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations."~~ Forward-looking statements discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business. 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,~~" "intend,~~" "seek," "may," "could," "would," "will," "should," "can," "can have," "likely," the negatives thereof and other similar expressions.

~~While we believe that our assumptions are reasonable, it is very difficult to predict the impact of known factors, and it is impossible to anticipate all factors that could affect our actual results.~~ 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 ~~Part I, Item 1A of~~ our Annual Report on Form 10-K for the fiscal year ended December ~~25, 2019~~30, 2020 as filed with the ~~U.S.~~ Securities and Exchange Commission (the "SEC") ~~under the heading "Risk Factors" and in Part II, Item 1A of this Quarterly Report on Form 10-Q for the quarterly period ended June 24, 2020.~~.

The forward-looking statements included in this Form 10-Q are made only as of the date hereof. ~~We undertake~~The Company undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

Shake Shack Inc.

Form 10-Q | 1

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).


			Page
Condensed Consolidated Balance Sheets			3
Condensed Consolidated Statements of Income (Loss)			4
Condensed Consolidated Statements of Comprehensive Income (Loss)			5
Condensed Consolidated Statements of Stockholders' Equity			6
Condensed Consolidated Statements of Cash Flows			8
Notes to Condensed Consolidated Financial Statements			9

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SHAKE SHACK INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share amounts)


			June 24 2020			December 25 2019								June 30 2021			December 30 2020
ASSETS	ASSETS												ASSETS
Current assets:	Current assets:												Current assets:
		Cash and cash equivalents		$	173,984			$	37,099			Cash and cash equivalents			$	340,103			$	146,873
		Marketable securities		16,833				36,508				Marketable securities			80,105				36,887
		Accounts receivable		8,291				9,970				Accounts receivable, net			11,703				9,464
		Inventories, net		2,346				2,221				Inventories			3,560				2,888
		Prepaid expenses and other current assets		2,622				1,877				Prepaid expenses and other current assets			2,690				7,074
		Total current assets		204,076				87,675				Total current assets			438,161				203,186
Property and equipment, net						322,162				314,862
Property and equipment, net of accumulated depreciation of $193,143 and $166,156, respectively								Property and equipment, net of accumulated depreciation of $193,143 and $166,156, respectively						356,202			336,541
Operating lease assets	Operating lease assets					298,602				274,426			Operating lease assets				326,744				306,317
Deferred income taxes, net	Deferred income taxes, net					286,887				279,817			Deferred income taxes, net				299,535				287,007
Other assets	Other assets					12,208				11,488			Other assets				11,625				12,297
TOTAL ASSETS	TOTAL ASSETS					$	1,123,935			$	968,268		TOTAL ASSETS				$	1,432,267			$	1,145,348
LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY												LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:	Current liabilities:												Current liabilities:

		Accounts payable		$	20,735			$	14,300			Accounts payable			$	26,292			$	23,487
		Accrued expenses		19,807				24,140				Accrued expenses			32,759				25,920
		Accrued wages and related liabilities		7,649				11,451				Accrued wages and related liabilities			14,864				10,441
		Operating lease liabilities, current		37,082				30,002				Operating lease liabilities, current			36,677				35,657
		Other current liabilities		11,400				19,499				Other current liabilities			13,899				14,200
		Total current liabilities		96,673				99,392				Total current liabilities			124,491				109,705

Long-term debt								Long-term debt						243,019			0

Long-term operating lease liabilities	Long-term operating lease liabilities					332,751				304,914			Long-term operating lease liabilities				363,482				343,736
Liabilities under tax receivable agreement, net of current portion	Liabilities under tax receivable agreement, net of current portion					228,096				226,649			Liabilities under tax receivable agreement, net of current portion				234,049				232,954
Other long-term liabilities	Other long-term liabilities					15,130				15,328			Other long-term liabilities				23,694				24,460
Total liabilities	Total liabilities					672,650				646,283			Total liabilities				988,735				710,855
Commitments and contingencies (Note 15)
Commitments and contingencies (Note 13)								Commitments and contingencies (Note 13)						0			0
Stockholders' equity:	Stockholders' equity:												Stockholders' equity:

		Preferred stock, no par value—10,000,000 shares authorized; none issued and outstanding as of June 24, 2020 and December 25, 2019.		—				—				Preferred stock, no par value—10,000,000 shares authorized; none issued and outstanding as of June 30, 2021 and December 30, 2020.			0				0
		Class A common stock, $0.001 par value—200,000,000 shares authorized; 38,236,538 and 34,417,302 shares issued and outstanding as of June 24, 2020 and December 25, 2019, respectively.		38				35				Class A common stock, $0.001 par value—200,000,000 shares authorized; 39,134,356 and 38,717,790 shares issued and outstanding as of June 30, 2021 and December 30, 2020, respectively.			39				39
		Class B common stock, $0.001 par value—35,000,000 shares authorized; 3,117,002 and 3,145,197 shares issued and outstanding as of June 24, 2020 and December 25, 2019, respectively.		3				3				Class B common stock, $0.001 par value—35,000,000 shares authorized; 2,921,587 and 2,951,188 shares issued and outstanding as of June 30, 2021 and December 30, 2020, respectively.			3				3
		Additional paid-in capital		384,338				244,410				Additional paid-in capital			401,567				395,067
		Retained earnings		37,196				54,367				Retained earnings			15,462				12,209
		Accumulated other comprehensive income		3				2				Accumulated other comprehensive income			2				3
		Total stockholders' equity attributable to Shake Shack Inc.		421,578				298,817				Total stockholders' equity attributable to Shake Shack Inc.			417,073				407,321
Non-controlling interests	Non-controlling interests					29,707				23,168			Non-controlling interests				26,459				27,172
Total equity	Total equity					451,285				321,985			Total equity				443,532				434,493
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY					$	1,123,935			$	968,268		TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY				$	1,432,267			$	1,145,348

See accompanying Notes to Condensed Consolidated Financial Statements.

Shake Shack Inc.

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SHAKE SHACK INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(UNAUDITED)

(in thousands, except per share amounts)


			Thirteen Weeks Ended											Twenty-Six Weeks Ended															Thirteen Weeks Ended								Twenty-Six Weeks Ended
			June 24 2020			June 26 2019				June 24 2020				June 26 2019								June 30 2021			June 24 2020				June 30 2021				June 24 2020
Shack sales	Shack sales					$	89,519			$	147,876			$	227,567			$	276,445		Shack sales				$	181,470			$	89,519			$	332,138			$	227,567
Licensing revenue	Licensing revenue					2,267				4,837				7,389				8,877			Licensing revenue				5,990				2,267				10,604				7,389
TOTAL REVENUE	TOTAL REVENUE					91,786				152,713				234,956				285,322			TOTAL REVENUE				187,460				91,786				342,742				234,956
Shack-level operating expenses:	Shack-level operating expenses:																				Shack-level operating expenses:
		Food and paper costs		30,027				42,899				69,591				80,890				Food and paper costs			54,917				30,027				99,547				69,591
		Labor and related expenses		30,933				40,197				72,699				77,290				Labor and related expenses			52,631				30,933				99,013				72,699
		Other operating expenses		14,304				16,755				32,083				32,323				Other operating expenses			24,275				14,304				47,419				32,083
		Occupancy and related expenses		12,323				11,873				24,881				22,772				Occupancy and related expenses			14,876				12,323				28,787				24,881
General and administrative expenses	General and administrative expenses					14,017				15,393				30,208				29,330			General and administrative expenses				20,366				14,017				39,931				30,208
Depreciation expense						12,089				9,799				23,857				18,765
Depreciation and amortization expense																Depreciation and amortization expense						14,472			12,089				28,198				23,857
Pre-opening costs	Pre-opening costs					1,734				3,549				3,977				6,191			Pre-opening costs				2,258				1,734				5,834				3,977
Impairment and loss on disposal of assets	Impairment and loss on disposal of assets					434				377				2,522				728			Impairment and loss on disposal of assets				358				434				727				2,522
TOTAL EXPENSES	TOTAL EXPENSES					115,861				140,842				259,818				268,289			TOTAL EXPENSES				184,153				115,861				349,456				259,818
OPERATING INCOME (LOSS)	OPERATING INCOME (LOSS)					(24,075)				11,871				(24,862)				17,033			OPERATING INCOME (LOSS)				3,307				(24,075)				(6,714)				(24,862)
Other income (loss), net						394				447				301				1,011
Other income, net																Other income, net						108			394				139				301
Interest expense	Interest expense					(442)				(97)				(554)				(169)			Interest expense				(359)				(442)				(874)				(554)
INCOME (LOSS) BEFORE INCOME TAXES	INCOME (LOSS) BEFORE INCOME TAXES					(24,123)				12,221				(25,115)				17,875			INCOME (LOSS) BEFORE INCOME TAXES				3,056				(24,123)				(7,449)				(25,115)
Income tax expense (benefit)	Income tax expense (benefit)					(6,092)				1,050				(6,005)				3,097			Income tax expense (benefit)				991				(6,092)				(10,089)				(6,005)
NET INCOME (LOSS)	NET INCOME (LOSS)					(18,031)				11,171				(19,110)				14,778			NET INCOME (LOSS)				2,065				(18,031)				2,640				(19,110)
Less: net income (loss) attributable to non-controlling interests						(1,820)				2,141				(1,939)				3,202
Less: Net income (loss) attributable to non-controlling interests																Less: Net income (loss) attributable to non-controlling interests						121			(1,820)				(613)				(1,939)
NET INCOME (LOSS) ATTRIBUTABLE TO SHAKE SHACK INC.	NET INCOME (LOSS) ATTRIBUTABLE TO SHAKE SHACK INC.					$	(16,211)			$	9,030			$	(17,171)			$	11,576		NET INCOME (LOSS) ATTRIBUTABLE TO SHAKE SHACK INC.				$	1,944			$	(16,211)			$	3,253			$	(17,171)
Earnings (loss) per share of Class A common stock:	Earnings (loss) per share of Class A common stock:																				Earnings (loss) per share of Class A common stock:
		Basic		$	(0.43)			$	0.30			$	(0.48)			$	0.39			Basic			$	0.05			$	(0.43)			$	0.08			$	(0.48)
		Diluted		$	(0.43)			$	0.29			$	(0.48)			$	0.38			Diluted			$	0.05			$	(0.43)			$	0.06			$	(0.48)
Weighted-average shares of Class A common stock outstanding:	Weighted-average shares of Class A common stock outstanding:																				Weighted-average shares of Class A common stock outstanding:
		Basic		37,309				30,122				35,876				29,842				Basic			39,114				37,309				39,031				35,876
		Diluted		37,309				31,015				35,876				30,703				Diluted			43,789				37,309				43,289				35,876

See accompanying Notes to Condensed Consolidated Financial Statements.

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SHAKE SHACK INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(in thousands)


				Thirteen Weeks Ended								Twenty-Six Weeks Ended												Thirteen Weeks Ended						Twenty-Six Weeks Ended
				June 24 2020		June 26 2019			June 24 2020			June 26 2019							June 30 2021		June 24 2020			June 30 2021			June 24 2020
Net income (loss)	Net income (loss)					$	(18,031)		$	11,171		$	(19,110)		$	14,778		Net income (loss)			$	2,065		$	(18,031)		$	2,640		$	(19,110)
Other comprehensive income, net of tax⁽¹⁾:
Other comprehensive income (loss), net of tax(1):														Other comprehensive income (loss), net of tax(1):
		Change in foreign currency translation adjustment			—			—			1			—			Change in foreign currency translation adjustment			0			0			(1)			1

			Net change	—		—			1			—					Net change		0		0			(1)			1
OTHER COMPREHENSIVE INCOME						—			—			1			—
OTHER COMPREHENSIVE INCOME (LOSS)														OTHER COMPREHENSIVE INCOME (LOSS)					0		0			(1)			1
COMPREHENSIVE INCOME (LOSS)	COMPREHENSIVE INCOME (LOSS)					(18,031)			11,171			(19,109)			14,778			COMPREHENSIVE INCOME (LOSS)			2,065			(18,031)			2,639			(19,109)
Less: comprehensive income (loss) attributable to non-controlling interest	Less: comprehensive income (loss) attributable to non-controlling interest					(1,820)			2,141			(1,939)			3,202			Less: comprehensive income (loss) attributable to non-controlling interest			121			(1,820)			(613)			(1,939)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO SHAKE SHACK INC.	COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO SHAKE SHACK INC.					$	(16,211)		$	9,030		$	(17,170)		$	11,576		COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO SHAKE SHACK INC.			$	1,944		$	(16,211)		$	3,252		$	(17,170)

(1)Net of tax expense of $0 for the thirteen and twenty-six weeks ended June 30, 2021 and June 24, ~~2020~~ ~~and~~ ~~June 26, 2019.~~2020.

See accompanying Notes to Condensed Consolidated Financial Statements.

Shake Shack Inc.

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SHAKE SHACK INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(UNAUDITED)

(in thousands, except share amounts)

For the Thirteen Weeks Ended June 24, 2020 and June 26, 2019
Class A
Common Stock Class B
Common Stock Additional
Paid-In
Capital Retained Earnings Accumulated Other Comprehensive Income Non-
Controlling
Interest Total
Equity
Shares Amount Shares Amount
BALANCE, MARCH 25, 2020 34,523,400 $ 35 3,117,002 $ 3 $ 246,970 $ 53,407 $ 3 $ 22,188 $ 322,606
Net loss (16,211) (1,820) (18,031)
Other comprehensive income:
Net change in foreign currency translation adjustment —
Equity-based compensation 1,429 1,429
Activity under stock compensation plans 63,601 — (164) 72 (92)
Redemption of LLC Interests — — — — —
Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis 385 385
Issuance of Class A common stock sold in equity offerings, net of underwriting discounts, commissions and offering costs 3,649,537 3 135,718 9,276 144,997
Distributions paid to non-controlling interest holders (9) (9)
BALANCE, JUNE 24, 2020 38,236,538 $ 38 3,117,002 $ 3 $ 384,338 $ 37,196 $ 3 $ 29,707 $ 451,285
BALANCE, MARCH 27, 2019 29,698,228 $ 31 7,453,515 $ 7 $ 199,315 $ 37,086 $ — $ 49,299 $ 285,738
Net income 9,030 2,141 11,171
Equity-based compensation 2,263 2,263
Activity under stock compensation plans 137,151 (43) 657 614
Redemption of LLC Interests 722,306 (722,306) 4,886 (4,886) —
Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis 2,445 2,445
Distributions paid to non-controlling interest holders (1,558) (1,558)
BALANCE, JUNE 26, 2019 30,557,685 $ 31 6,731,209 $ 7 $ 208,866 $ 46,116 $ — $ 45,653 $ 300,673


For the Thirteen Weeks Ended June 30, 2021 and June 24, 2020
		Class A Common Stock			Class B Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Non- Controlling Interest		Total Equity
		Shares	Amount		Shares	Amount
BALANCE, MARCH 31, 2021		39,103,239	$	39	2,921,588	$	3	$	400,371	$	13,518	$	2	$	26,017	$	439,950

	Net income (loss)									1,944				121		2,065
	Other comprehensive income (loss):

	Net change in foreign currency translation adjustment											—				—
	Equity-based compensation							1,987								1,987
	Activity under stock compensation plans	31,116	—					(788)						557		(231)

	Redemption of LLC Interests	1	—		(1)	—		(3)						3		0

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

	Issuance of Class A common stock sold in equity offerings, net of underwriting discounts, commissions and offering costs	—	—					—						—		—
	Distributions paid to non-controlling interest holders													(239)		(239)
BALANCE, JUNE 30, 2021		39,134,356	$	39	2,921,587	$	3	$	401,567	$	15,462	$	2	$	26,459	$	443,532

BALANCE, MARCH 25, 2020		34,523,400	$	35	3,117,002	$	3	$	246,970	$	53,407	$	3	$	22,188	$	322,606

	Net income (loss)									(16,211)				(1,820)		(18,031)
	Other comprehensive income (loss):
	Net change in foreign currency translation adjustment											—				—
	Equity-based compensation							1,429								1,429
	Activity under stock compensation plans	63,601	—					(164)						72		(92)
	Redemption of LLC Interests	—	—		—	—										0

	Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis							385								385
	Issuance of Class A common stock sold in equity offerings, net of underwriting discounts, commissions and offering costs	3,649,537	3					135,718						9,276		144,997
	Distributions paid to non-controlling interest holders													(9)		(9)
BALANCE, JUNE 24, 2020		38,236,538	$	38	3,117,002	$	3	$	384,338	$	37,196	$	3	$	29,707	$	451,285

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For the Twenty-Six Weeks Ended June 24, 2020 and June 26, 2019
Class A
Common Stock Class B
Common Stock Additional
Paid-In
Capital Retained Earnings Accumulated Other Comprehensive Income Non-
Controlling
Interest Total
Equity
Shares Amount Shares Amount
BALANCE, DECEMBER 25, 2019 34,417,302 $ 35 3,145,197 $ 3 $ 244,410 $ 54,367 $ 2 $ 23,168 $ 321,985
Net loss (17,171) (1,939) (19,110)
Other comprehensive income:
Net change in foreign currency translation adjustment 1 1
Equity-based compensation 2,742 2,742
Activity under stock compensation plans 141,504 — 260 (289) (29)
Redemption of LLC Interests 28,195 — (28,195) — 195 (195) —
Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis 1,013 1,013
Issuance of Class A common stock sold in equity offerings, net of underwriting discounts, commissions and offering costs 3,649,537 3 135,718 9,276 144,997
Distributions paid to non-controlling interest holders (314) (314)
BALANCE, JUNE 24, 2020 38,236,538 $ 38 3,117,002 $ 3 $ 384,338 $ 37,196 $ 3 $ 29,707 $ 451,285
BALANCE, DECEMBER 26, 2018 29,520,833 $ 30 7,557,347 $ 8 $ 195,633 $ 30,404 $ — $ 47,380 $ 273,455
Cumulative effect of accounting changes 4,136 1,059 5,195
Net income 11,576 3,202 14,778
Equity-based compensation 4,010 4,010
Activity under stock compensation plans 210,714 — 932 1,159 2,091
Redemption of LLC Interests 826,138 1 (826,138) (1) 5,480 (5,480) —
Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis 2,811 2,811
Distributions paid to non-controlling interest holders (1,667) (1,667)
BALANCE, JUNE 26, 2019 30,557,685 $ 31 6,731,209 $ 7 $ 208,866 $ 46,116 $ — $ 45,653 $ 300,673


For the Twenty-Six Weeks Ended June 30, 2021 and June 24, 2020
		Class A Common Stock			Class B Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Non- Controlling Interest		Total Equity
		Shares	Amount		Shares	Amount
BALANCE, DECEMBER 30, 2020		38,717,790	$	39	2,951,188	$	3	$	395,067	$	12,209	$	3	$	27,172	$	434,493

	Net income (loss)									3,253				(613)		2,640
	Other comprehensive income (loss):

	Net change in foreign currency translation adjustment											(1)				(1)
	Equity-based compensation							3,683								3,683
	Activity under stock compensation plans	386,965	—					2,571						639		3,210

	Redemption of LLC Interests	29,601	—		(29,601)	—		33						(33)		0

	Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis							213								213
	Issuance of Class A common stock sold in equity offerings, net of underwriting discounts, commissions and offering costs	0	0					0						0		0
	Distributions paid to non-controlling interest holders													(706)		(706)
BALANCE, JUNE 30, 2021		39,134,356	$	39	2,921,587	$	3	$	401,567	$	15,462	$	2	$	26,459	$	443,532

BALANCE, DECEMBER 25, 2019		34,417,302	$	35	3,145,197	$	3	$	244,410	$	54,367	$	2	$	23,168	$	321,985

	Net income (loss)									(17,171)				(1,939)		(19,110)
	Other comprehensive income (loss):
	Net change in foreign currency translation adjustment											1				1
	Equity-based compensation							2,742								2,742
	Activity under stock compensation plans	141,504	—					260						(289)		(29)
	Redemption of LLC Interests	28,195	—		(28,195)	—		195						(195)		0

	Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis							1,013								1,013
	Issuance of Class A common stock sold in equity offerings, net of underwriting discounts, commissions and offering costs	3,649,537	3					135,718						9,276		144,997
	Distributions paid to non-controlling interest holders													(314)		(314)
BALANCE, JUNE 24, 2020		38,236,538	$	38	3,117,002	$	3	$	384,338	$	37,196	$	3	$	29,707	$	451,285

See accompanying Notes to Condensed Consolidated Financial Statements.

Shake Shack Inc.

Form 10-Q | 7

Table of Contents

SHAKE SHACK INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


				Twenty-Six Weeks Ended													Twenty-Six Weeks Ended
				June 24 2020	June 26 2019											June 30 2021	June 24 2020
OPERATING ACTIVITIES	OPERATING ACTIVITIES														OPERATING ACTIVITIES
Net income (loss) (including amounts attributable to non-controlling interests)	Net income (loss) (including amounts attributable to non-controlling interests)								$	(19,110)		$	14,778		Net income (loss) (including amounts attributable to non-controlling interests)					$	2,640		$	(19,110)
Adjustments to reconcile net income (loss) to net cash provided by operating activities	Adjustments to reconcile net income (loss) to net cash provided by operating activities														Adjustments to reconcile net income (loss) to net cash provided by operating activities
							Depreciation and amortization expense									28,198	23,857
		Depreciation expense						23,857			18,765			Amortization of debt issuance costs					344			0
		Amortization of cloud computing asset						628			—			Amortization of cloud computing asset					627			628
		Non-cash operating lease cost						22,220			18,765			Non-cash operating lease cost					24,716			22,220
		Equity-based compensation						2,719			3,872			Equity-based compensation					3,639			2,719
		Deferred income taxes						11,225			317			Deferred income taxes					6,265			11,225
		Non-cash interest expense						16			—			Non-cash interest expense					343			16

		Gain on sale of marketable securities						(79)			(22)			Loss (gain) on sale of marketable securities					5			(79)
		Impairment and loss on disposal of assets						2,522			728			Impairment and loss on disposal of assets					727			2,522
		Unrealized (gain) loss on available-for-sale securities						22			(231)			Unrealized loss on equity securities					37			22
		Other non-cash expense						897			2			Other non-cash (income) expense					(1)			897

		Changes in operating assets and liabilities:												Changes in operating assets and liabilities:
			Accounts receivable			1,679			7,252					Accounts receivable				(2,239)		1,679
			Inventories			(125)			57					Inventories				(672)		(125)
			Prepaid expenses and other current assets			(745)			(3,908)					Prepaid expenses and other current assets				4,384		(745)
			Other assets			(1,542)			(5,354)					Other assets				(488)		(1,542)
			Accounts payable			5,802			(5,202)					Accounts payable				4,236		5,802
			Accrued expenses			(15,179)			3,870					Accrued expenses				(13,643)		(15,179)
			Accrued wages and related liabilities			(3,802)			(1,271)					Accrued wages and related liabilities				4,423		(3,802)
			Other current liabilities			(782)			862					Other current liabilities				(1,515)		(782)

			Long-term operating lease liabilities			(12,649)			(17,408)					Long-term operating lease liabilities				(24,583)		(12,649)
			Other long-term liabilities			419			19					Other long-term liabilities				(438)		419
NET CASH PROVIDED BY OPERATING ACTIVITIES	NET CASH PROVIDED BY OPERATING ACTIVITIES								17,993			35,891			NET CASH PROVIDED BY OPERATING ACTIVITIES					37,005			17,993
INVESTING ACTIVITIES	INVESTING ACTIVITIES														INVESTING ACTIVITIES
Purchases of property and equipment	Purchases of property and equipment								(37,637)			(55,998)			Purchases of property and equipment					(44,709)			(37,637)
Purchases of marketable securities	Purchases of marketable securities								(268)			(715)			Purchases of marketable securities					(47,264)			(268)
Sales of marketable securities	Sales of marketable securities								20,000			27,000			Sales of marketable securities					4,004			20,000
NET CASH USED IN INVESTING ACTIVITIES	NET CASH USED IN INVESTING ACTIVITIES								(17,905)			(29,713)			NET CASH USED IN INVESTING ACTIVITIES					(87,969)			(17,905)
FINANCING ACTIVITIES	FINANCING ACTIVITIES														FINANCING ACTIVITIES

Proceeds from issuance of convertible notes, net of discount						Proceeds from issuance of convertible notes, net of discount										243,750	0
Proceeds from revolving credit facility	Proceeds from revolving credit facility								50,000			—			Proceeds from revolving credit facility					0			50,000
Payments on revolving credit facility	Payments on revolving credit facility								(50,000)			—			Payments on revolving credit facility					0			(50,000)

Deferred financing costs	Deferred financing costs								(64)			—			Deferred financing costs					(101)			(64)

Proceeds from issuance of Class A common stock sold in equity offerings, net of underwriting discounts, commissions and offering costs	Proceeds from issuance of Class A common stock sold in equity offerings, net of underwriting discounts, commissions and offering costs								144,997			—			Proceeds from issuance of Class A common stock sold in equity offerings, net of underwriting discounts, commissions and offering costs					0			144,997
Payments on principal of finance leases	Payments on principal of finance leases								(1,150)			(912)			Payments on principal of finance leases					(1,272)			(1,150)
Distributions paid to non-controlling interest holders	Distributions paid to non-controlling interest holders								(314)			(1,667)			Distributions paid to non-controlling interest holders					(706)			(314)

Payments under tax receivable agreement	Payments under tax receivable agreement								(6,643)			(707)			Payments under tax receivable agreement					0			(6,643)
Debt issuance costs						Debt issuance costs										(687)	0
Proceeds from stock option exercises	Proceeds from stock option exercises								1,740			3,427			Proceeds from stock option exercises					6,610			1,740
Employee withholding taxes related to net settled equity awards	Employee withholding taxes related to net settled equity awards								(1,769)			(1,336)			Employee withholding taxes related to net settled equity awards					(3,400)			(1,769)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES									136,797			(1,195)
NET CASH PROVIDED BY FINANCING ACTIVITIES						NET CASH PROVIDED BY FINANCING ACTIVITIES										244,194	136,797
NET INCREASE IN CASH AND CASH EQUIVALENTS	NET INCREASE IN CASH AND CASH EQUIVALENTS								136,885			4,983			NET INCREASE IN CASH AND CASH EQUIVALENTS					193,230			136,885
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD								37,099			24,750			CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD					146,873			37,099
CASH AND CASH EQUIVALENTS AT END OF PERIOD	CASH AND CASH EQUIVALENTS AT END OF PERIOD								$	173,984		$	29,733		CASH AND CASH EQUIVALENTS AT END OF PERIOD					$	340,103		$	173,984

See accompanying Notes to Condensed Consolidated Financial Statements.

8 | Shake Shack Inc.

Form 10-Q

Table of Contents

SHAKE SHACK INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

Shake Shack Inc.

Form 10-Q | 9

Table of Contents

NOTE 1: NATURE OF OPERATIONS

Shake Shack Inc. ~~("we," "us," "our," "Shake Shack" and the "Company")~~ was formed on September 23, 2014 as a Delaware corporation for the purpose of facilitating an initial public offering and other related transactions in order to carry on the business of SSE Holdings, LLC and its subsidiaries ("SSE Holdings"). ~~We are~~Shake Shack is the sole managing member of SSE Holdings and, as sole managing member, ~~we operate~~the Company operates and ~~control~~controls all of the business and affairs of SSE Holdings. As a result, ~~we consolidate~~the Company consolidates the financial results of SSE Holdings and ~~report~~reports a non-controlling interest representing the economic interest in SSE Holdings held by the other members of SSE Holdings. As of June ~~24, 2020 we~~30, 2021 the Company owned ~~92.5%~~93.1% of SSE Holdings. Unless the context otherwise requires, "we," "us," "our," "Shake Shack," the "Company" and other similar references, refer to Shake Shack Inc. and, unless otherwise stated, all of its subsidiaries, including SSE Holdings.

~~We operate~~The Company operates and ~~license~~licenses Shake Shack restaurants ("Shacks"), which serve hamburgers, hot dogs, chicken, crinkle-cut fries, shakes, frozen custard, beer, wine and more. As of June ~~24, 2020,~~30, 2021, there were ~~292~~339 Shacks in operation, system-wide, of which ~~171~~200 were domestic ~~company-operated~~Company-operated Shacks, 2223 were domestic licensed Shacks and 99116 were international licensed Shacks. As of June ~~24, 2020,~~30, 2021, one domestic Company-operated Shack and 8 ~~domestic company-operated Shacks and 27~~ licensed Shacks were temporarily closed due to ~~COVID-19.~~the COVID-19 pandemic.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Shake Shack Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. These interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and on a basis consistent in all material respects with the accounting policies described in ~~our~~its Annual Report on Form 10-K for the fiscal year ended December ~~25, 2019~~30, 2020 ("~~2019~~2020 Form 10-K"). Certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in ~~our 2019~~its 2020 Form 10-K. In ~~our~~the Company's opinion, all adjustments, which are normal and recurring in nature, necessary for a fair presentation of ~~our~~the financial position and results of operation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year.

SSE Holdings is considered a variable interest entity. Shake Shack Inc. is the primary beneficiary as ~~we have~~the Company has the majority economic interest in SSE Holdings and, as the sole managing member, ~~have~~has decision making authority that significantly affects the economic performance of the entity, while the limited partners have no substantive kick-out or participating rights. As a result, ~~we consolidate~~the Company consolidates SSE Holdings. The assets and liabilities of SSE Holdings represent substantially all of ~~our~~the Company's consolidated assets and liabilities with the exception of certain deferred taxes and liabilities under the Tax Receivable Agreement. As of June ~~24, 2020~~30, 2021 and December ~~25, 2019,~~30, 2020, the net assets of SSE Holdings were ~~$394,424~~$384,193 and ~~$270,542,~~$383,669, respectively. The assets of SSE Holdings are subject to certain restrictions in SSE Holdings' revolving credit agreement. ~~See~~Refer to Note 86, Debt, for ~~more~~additional information.

Fiscal Year

~~We operate~~The Company operates on a 52/53 week fiscal year ending on the last Wednesday in December. Fiscal ~~2020~~2021 contains 5352 weeks and ends on December ~~30, 2020.~~29, 2021. Fiscal ~~2019~~2020 contained 5253 weeks and ended on December ~~25, 2019.~~30, 2020. Unless otherwise stated, references to years in this report relate to fiscal years.

10 | Shake Shack Inc.

Form 10-Q

Table of Contents

Use of Estimates

The preparation of these condensed consolidated financial statements in conformity with GAAP requires usmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates.

~~10 |~~ ~~Shake Shack Inc.~~ ~~Form 10-Q~~

~~Table of Contents~~

Recently Adopted Accounting Pronouncements

WeThe Company adopted the Accounting Standards Updates (“ASUs”) summarized below in fiscal ~~2020.~~2021.


Accounting Standards Update ~~(“ASU”)~~	Description	Date Adopted
Simplifying the Accounting for Income Taxes (ASU 2019-12)	~~Measurement~~This standard simplifies various aspects related to accounting for income taxes by removing certain exceptions to the general principles in ASC 740, “Income Taxes” (“ASC 740”), and clarifying certain aspects of ~~Credit Losses on Financial Instruments~~the current guidance to promote consistency among reporting entities. ~~(ASU 2016-13)~~	This standard replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The adoption of this standard did not have a material impact to ~~our~~the Company's condensed consolidated financial statements.	~~December 26, 2019~~
Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04)	This standard provides optional guidance for a limited time to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. The adoption of this standard did not have a material impact to our consolidated financial statements.	~~Effective upon issuance (March 12, 2020)~~

~~Recently Issued Accounting Pronouncements~~


~~Accounting Standards Update (“ASU”)~~	~~Description~~	~~Expected Impact~~	~~Effective Date~~
Simplifying the Accounting for Income Taxes (ASU 2019-12)	This standard removes certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation and calculating income taxes in interim periods. It also adds guidance in certain areas, including the recognition of franchise taxes, recognition of deferred taxes for tax goodwill, allocation of taxes to members of a consolidated group, computation of annual effective tax rates related to enacted changes in tax laws, and minor improvements related to employee stock ownership plans and investments in qualified affordable housing projects accounted for using the equity method.	~~We are currently evaluating the impact this standard will have on our consolidated financial statements.~~	December 31, 2020
Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40)—Accounting For Convertible Instruments and Contracts in an Entity's Own Equity. ~~Early adoption~~ (ASU 2020-06)	This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity and improves and amends the related earnings per share guidance for both Subtopics. The Company elected to early adopt this standard, beginning December 31, 2020. The guidance of this ASU is ~~permitted.~~applicable to the convertible notes issued in March 2021. As a result, the convertible notes are accounted for as a single liability measured at amortized cost. The if-converted earnings per share ("EPS") method is used, with the effect of potential share settlement included in diluted EPS. Refer to Note 6, Debt, and Note 11, Earnings Per Share, for additional information.	December 31, 2020

NOTE 3: REVENUE

Revenue Recognition

Revenue consists of Shack sales and ~~licensing~~Licensing revenue. Generally, revenue is recognized as promised goods or services transfer to the guest or customer in an amount that reflects the consideration ~~we expect~~the Company expects to be entitled to in exchange for those goods or services. Shack sales are recognized when payment is tendered at the point of sale as the performance obligation has been satisfied.

Revenue from Shack sales is presented net of discounts and recognized when food, beverage and retail products are sold. Sales tax collected from customers is excluded from Shack sales and the obligation is included in sales tax payable until the taxes are remitted to the appropriate taxing authorities. Revenue from ~~our~~ gift cards is deferred and recognized upon redemption.

Licensing ~~revenues include~~revenue includes initial territory fees, Shack opening fees, and ongoing sales-based royalty fees from licensed Shacks. Generally, the licenses granted to develop, open and operate each Shack in a specified territory are the predominant goods or services transferred to the licensee in ~~our~~the contracts, and represent distinct performance obligations. Ancillary promised services, such as training and assistance during the initial opening of a Shack, are typically combined with the licenses and considered as one performance obligation per Shack. ~~We determine~~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 ~~we expect~~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 estimate of the number of Shacks ~~we expect~~the Company expects the licensee to open. The transaction price is then allocated equally to each Shack expected to open. The performance obligations are satisfied over time, starting when a Shack opens, through the end of the term of the

Shake Shack Inc.

Form 10-Q | 11

Table of Contents

license granted to the Shack. Because ~~we are~~the Company is transferring licenses to access ~~our~~ intellectual property during a contractual term, 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 licensing agreement,

~~Shake Shack Inc.~~ ~~Form 10-Q~~ | 11

~~Table of Contents~~

and payment for the ~~restaurant~~Shack opening fees are received either in advance of or upon opening the related ~~restaurant.~~Shack. These payments are initially deferred and recognized as revenue as the performance obligations are satisfied, which occurs over a long-term period.

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

Revenue recognized during the thirteen and twenty-six weeks ended June ~~24, 2020~~30, 2021 and June ~~26, 2019,~~24, 2020, disaggregated by type is as follows:


		Thirteen Weeks Ended						Twenty-Six Weeks Ended							Thirteen Weeks Ended				Twenty-Six Weeks Ended
		June 24 2020		June 26 2019		June 24 2020		June 26 2019			June 30 2021		June 24 2020		June 30 2021		June 24 2020
Shack sales	Shack sales	$	89,519	$	147,876	$	227,567	$	276,445	Shack sales	$	181,470	$	89,519	$	332,138	$	227,567
Licensing revenue:	Licensing revenue:									Licensing revenue:
Sales-based royalties	Sales-based royalties	2,133		4,741		7,076		8,645		Sales-based royalties	5,825		2,133		10,250		7,076
Initial territory and opening fees	Initial territory and opening fees	134		96		313		232		Initial territory and opening fees	165		134		354		313
Total revenue	Total revenue	$	91,786	$	152,713	$	234,956	$	285,322	Total revenue	$	187,460	$	91,786	$	342,742	$	234,956

The aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of June 30, 2021 and June 24, 2020 was ~~$15,794. We expect~~$17,633 and $15,794, respectively. 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. This amount excludes any variable consideration related to sales-based royalties.

Contract Balances

Opening and closing balances of contract liabilities and receivables from contracts with customers is as follows:


		June 24 2020		December 26 2019				June 30 2021			December 31 2020
Shack sales receivables	Shack sales receivables	$	3,713	$	4,265	Shack sales receivables		$	5,880		$	5,373
Licensing receivables		2,664		4,510
Licensing receivables, net of allowance for doubtful accounts				Licensing receivables, net of allowance for doubtful accounts			4,003			2,647
Gift card liability	Gift card liability	2,188		2,258		Gift card liability		2,641			2,637
Deferred revenue, current	Deferred revenue, current	552		511		Deferred revenue, current		681			608
Deferred revenue, long-term	Deferred revenue, long-term	11,221		11,310		Deferred revenue, long-term		12,704			12,151

Revenue recognized during the thirteen and twenty-six weeks ended June ~~24, 2020~~30, 2021 and June ~~26, 2019~~24, 2020 that was included in their respective liability balances at the beginning of the period is as follows:


		Thirteen Weeks Ended						Twenty-Six Weeks Ended							Thirteen Weeks Ended				Twenty-Six Weeks Ended
		June 24 2020		June 26 2019		June 24 2020		June 26 2019			June 30 2021		June 24 2020		June 30 2021		June 24 2020
Gift card liability	Gift card liability	$	46	$	105	$	345	$	383	Gift card liability	$	108	$	46	$	327	$	345
Deferred revenue	Deferred revenue	134		85		305		219		Deferred revenue	159		134		340		305

NOTE 4: FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The ~~following tables present information about our financial assets~~carrying value of the Company's Cash and ~~liabilities measured at~~cash equivalents, Accounts receivable, net, Accounts payable and Accrued expenses approximate their fair value ~~on a recurring basis as~~due to the short-term nature of ~~June 24, 2020 and December 25, 2019, and indicate the classification within the fair value hierarchy.~~

these financial instruments.

Shake Shack Inc.

Form 10-Q | 12

Table of Contents

~~Cash, Cash Equivalents~~As of June 30, 2021 and December 30, 2020, the Company held certain assets that are required to be measured at fair value on a recurring basis including Marketable ~~Securities~~securities, which consist of investments in equity securities. Fair value of these investments is measured using Level 1 inputs (unadjusted quoted prices in active markets for identical assets). The carrying value of these investments in equity securities approximates fair value.

~~The following tables summarize our cash, cash equivalents and marketable securities by significant investment categories~~Assets measured at fair value on a recurring basis as of June ~~24, 2020~~30, 2021 and December ~~25, 2019:~~30, 2020 were as follows:

June 24, 2020
Cost Basis Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash and Cash Equivalents Marketable Securities
Cash $ 173,984 $ — $ — $ 173,984 $ 173,984 $ —
Level 1:
Money market funds — — — — — —
Mutual funds 16,783 50 — 16,833 — 16,833
Total $ 190,767 $ 50 $ — $ 190,817 $ 173,984 $ 16,833


		Fair Value Measurements
		June 30 2021		December 30 2020
		Level 1		Level 1
Equity securities:
	Mutual funds	$	80,105	$	36,887
Total Marketable securities		$	80,105	$	36,887

December 25, 2019
Cost Basis Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash and Cash Equivalents Marketable Securities
Cash $ 32,094 $ — $ — $ 32,094 $ 32,094 $ —
Level 1:
Money market funds 5,005 — — 5,005 5,005 —
Mutual funds 36,436 72 — 36,508 — 36,508
Total $ 73,535 $ 72 $ — $ 73,607 $ 37,099 $ 36,508

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

A summary of ~~other~~Other income, ~~(loss)~~net from equity securities recognized during the thirteen and twenty-six weeks ended June ~~24, 2020~~30, 2021 and June ~~26, 2019~~24, 2020 is as follows:

Thirteen Weeks Ended Twenty-Six Weeks Ended
June 24
2020 June 26
2019 June 24
2020 June 26
2019
Equity securities:
Dividend income $ 66 $ 351 $ 250 $ 743
Realized gain (loss) on sale of investments — 36 79 22
Unrealized gain (loss) on equity securities 334 74 (22) 231
Total $ 400 $ 461 $ 307 $ 996

~~A summary of equity securities sold and gross realized gains and losses recognized during the thirteen and twenty-six weeks ended June 24, 2020 and June 26, 2019 is as follows:~~

Thirteen Weeks Ended Twenty-Six Weeks Ended
June 24
2020 June 26
2019 June 24
2020 June 26
2019
Equity securities:
Gross proceeds from sales and redemptions $ — $ 12,000 $ 20,000 $ 27,000
Cost basis of sales and redemptions — 11,964 19,921 26,978
Gross realized gains included in net income (loss) — 36 79 36
Gross realized losses included in net income (loss) — — — (14)

Realized gains and losses are determined on a specific identification method and are included in other income, net on the Condensed Consolidated Statements of Income (Loss). As of June 24, 2020 and December 25, 2019, there was no decline in the market value of our marketable securities investment portfolio.

~~Shake Shack Inc.~~ ~~Form 10-Q~~ | 13

~~Table of Contents~~

~~Other Financial Instruments~~

The carrying value of our other financial instruments, including accounts receivable, accounts payable, and accrued expenses as of June 24, 2020 and December 25, 2019 approximated their fair value due to the short-term nature of these financial instruments.


		Thirteen Weeks Ended				Twenty-Six Weeks Ended
		June 30 2021		June 24 2020		June 30 2021		June 24 2020
Equity securities:
	Dividend income	$	93	$	66	$	167	$	250

	Realized gain (loss) on sale of investments	(5)		0		(5)		79
	Unrealized gain (loss) on equity securities	9		334		(37)		(22)
Total		$	97	$	400	$	125	$	307

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

Assets and liabilities that are measured at fair value on a non-recurring basis include ~~our~~ long-lived assets, operating lease right-of-use assets and indefinite-lived intangible assets. There were no impairment charges recognized during the thirteen and twenty-six weeks ended June 30, 2021. During the twenty-six weeks ended June 24, 2020, wethe Company recognized an impairment charge of $1,132 at one location. Of the total impairment charge, $736 was attributed to property and equipment held and used, $383 was attributed to operating lease right-of-use assets, and $13 was attributed to finance lease right-of-use assets. The ~~asset~~ impairment charge iswas included in Impairment and loss on disposal of assets on the Condensed Consolidated ~~Statement~~Statements of Income (Loss). The fair values of assets were determined using an income-based approach and are classified as Level 3 within the fair value hierarchy. Significant inputs include projections of future cash flows, discount rates, Shack sales and ~~profitability. There~~profitability.There were no impairment charges recognized during the thirteen weeks ended June 24, 2020.

~~NOTE 5: INVENTORIES~~

Inventories are stated at the lower of cost or net realizable value with cost determined on a first-in, first-out basis. We make adjustments to our inventory reserves for inventories that are deemed to be obsolete or slow moving. As of June 24, 2020 and December 25, 2019, no adjustment was deemed necessary to reduce inventory to net realizable value due to the rapid turnover and high utilization of inventory. Inventories as of June 24, 2020 and December 25, 2019 consisted of the following:

June 24
2020 December 25
2019
Food $ 1,498 $ 1,738
Wine 95 107
Beer 109 114
Beverages 211 233
Retail merchandise 18 29
Paper goods 415 —
Inventories $ 2,346 $ 2,221

~~NOTE 6: PROPERTY AND EQUIPMENT~~

~~Property and equipment as of June 24, 2020 and December 25, 2019 consisted of the following:~~

June 24
2020 December 25
2019
Leasehold improvements $ 321,137 $ 302,204
Equipment 57,669 54,404
Furniture and fixtures 18,986 18,082
Computer equipment and software 25,544 24,226
Financing equipment lease assets 8,383 7,442
Construction in progress 32,293 30,290
Property and equipment, gross 464,012 436,648
Less: accumulated depreciation 141,850 121,786
Property and equipment, net $ 322,162 $ 314,862

~~14 |~~ Shake Shack Inc.

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NOTE 7:5: SUPPLEMENTAL BALANCE SHEET INFORMATION

The components of ~~other~~Other current liabilities as of June ~~24, 2020~~30, 2021 and December ~~25, 2019~~30, 2020 are as follows:


		June 24 2020		December 25 2019			June 30 2021		December 30 2020
Sales tax payable	Sales tax payable	$	2,426	$	4,086	Sales tax payable	$	4,351	$	4,285
Current portion of liabilities under tax receivable agreement		—		7,777

Gift card liability	Gift card liability	2,188		2,258		Gift card liability	2,641		2,637

Current portion of financing equipment lease liabilities	Current portion of financing equipment lease liabilities	1,802		1,873		Current portion of financing equipment lease liabilities	2,553		1,998
Other	Other	4,984		3,505		Other	4,354		5,280
Other current liabilities	Other current liabilities	$	11,400	$	19,499	Other current liabilities	$	13,899	$	14,200

The components of ~~other~~Other long-term liabilities as of June ~~24, 2020~~30, 2021 and December ~~25, 2019~~30, 2020 are as follows:


		June 24 2020		December 25 2019			June 30 2021		December 30 2020
Deferred licensing revenue	Deferred licensing revenue	$	11,221	$	11,310	Deferred licensing revenue	$	12,704	$	12,151
Long-term portion of financing equipment lease liabilities	Long-term portion of financing equipment lease liabilities	3,559		3,643		Long-term portion of financing equipment lease liabilities	4,122		3,586
Other(1)	Other(1)	350		375		Other(1)	6,868		8,723
Other long-term liabilities	Other long-term liabilities	$	15,130	$	15,328	Other long-term liabilities	$	23,694	$	24,460

(1)As of June 30, 2021, Other included $3,967 of deferred lease incentive liabilities related to leases with variable lease cost as well as $2,607 of deferred Social Security taxes associated with the Coronavirus Aid, Relief, and Economic Security Act. As of December 30, 2020, Other included $3,182 of deferred lease incentive liabilities related to leases with variable lease cost as well as $5,214 of deferred Social Security taxes associated with the Coronavirus Aid, Relief, and Economic Security Act.

NOTE 8:6: DEBT

Revolving Credit Facility

In August 2019, ~~we terminated our previous revolving credit facility and~~the Company entered into a ~~new~~ revolving credit facility agreement ("Revolving Credit Facility"), which permits borrowings up to $50,000, of which the entire amount is available immediately, with the ability to increase available borrowings up to an additional $100,000, to be made available subject to satisfaction of certain conditions. The Revolving Credit Facility ~~will mature and all amounts outstanding will be due and payable in August 2024. The Revolving Credit Facility~~ also permits the issuance of letters of credit upon ~~our~~ request of up to $15,000. ~~Borrowings~~

In March 2020, the Company drew down the full $50,000 available under the Revolving Credit Facility ~~will bear~~to enhance liquidity and financial flexibility given the uncertain market conditions created by the COVID-19 pandemic. This amount was paid in full, plus interest, in June 2020.

In May 2020, the Company entered into a first amendment to the Revolving Credit Facility ("First Amendment"), which, among other things, provided for modified financial covenant compliance requirements for a period of time. The First Amendment required the Company to maintain minimum liquidity of $25,000 through July 1, 2021 and outstanding borrowings during the applicable period covered by the First Amendment bore interest at either: (i) ~~LIBOR~~the London Interbank Offered Rate ("LIBOR") plus a percentage ranging from 1.0% to ~~1.5%~~2.5% or (ii) the base rate plus a percentage ranging from 0.0% to ~~0.5%~~1.5%, in each case depending on ~~our~~the Company's net lease adjusted leverage ratio. To

In March 2021, the ~~extent~~Company entered into a second amendment to the Revolving Credit Facility (“Second Amendment”). The Second Amendment modified the applicable covenants and restrictions in the Revolving Credit Facility to permit the incurrence of the Convertible Notes (as defined below), including obligations and transactions in connection therewith. In addition, the Second Amendment, among other things, (i) extended the period applicable to the increased interest rate margin as set forth in the First Amendment; (ii) shortened the maturity date of the Revolving Credit Facility from August 2024 to September 2022 and (iii) added

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mechanics relating to the transition from the use of LIBOR ~~reference rate is no longer available,~~to the Secured Overnight Financing Rate ("SOFR") upon the discontinuance or unavailability of LIBOR.

Subsequently, and also in March 2021, the Company entered into a third amendment to the Revolving Credit Facility (“Third Amendment”) as Wells Fargo Bank resigned as administrative agent ~~in consultation with us, will determine a replacement rate which will be generally in accordance with similar transactions in which it serves~~under the Revolving Credit Facility and assigned its commitments thereunder to JPMorgan Bank, N.A. The Third Amendment appoints JPMorgan Bank, N.A. as administrative ~~agent.~~ agent under the Revolving Credit Facility. In addition, the Third Amendment, among other things, extends the maturity date of the Revolving Credit Facility from September 2022 to March 2026. As of June 30, 2021 and December 30, 2020, 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. The obligations under the Revolving Credit Facility are guaranteed by each of SSE Holdings' direct and indirect subsidiaries (with certain exceptions).

The Revolving Credit Facility requires usthe Company to comply with maximum net lease adjusted leverage and minimum fixed charge coverage ratios. ~~We are~~The Company is not subject to these coverage ratios for a period of time due to the ~~First~~Second Amendment to the Revolving Credit Facility described ~~below.~~above. In addition, the Revolving Credit Facility contains other customary affirmative and negative covenants, including those which (subject to certain exceptions and dollar thresholds) limit ~~our~~the Company's ability to incur debt; incur liens; make investments; engage in mergers, consolidations, liquidations or acquisitions; dispose of assets; make distributions on or repurchase equity securities; engage in transactions with affiliates; and prohibits ~~us,~~the Company, with certain exceptions, from engaging in any line of business not related to ~~our~~its current line of business. As of June ~~24, 2020, we were~~30, 2021, the Company was in compliance with all covenants.

~~In May 2020, we entered into a first amendment~~As of June 30, 2021, the Revolving Credit Facility had unamortized deferred financing costs of $105, and was included in Other assets on the Condensed Consolidated Balance Sheets. Total interest expense related to the Revolving Credit Facility ~~("First Amendment"~~for the thirteen and twenty-six weeks ended June 30, 2021 was $37 and $405, respectively, and $442 and $554, respectively, for the thirteen and twenty-six weeks ended June 24, 2020. Interest expense for the twenty-six weeks ended June 30, 2021 primarily included the write-off of previously capitalized costs on the Revolving Credit Facility.

Convertible Notes

In March 2021, the Company issued $225,000 aggregate principal amount of 0% Convertible Senior Notes due 2028 (“Convertible Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933. The Company granted an option to the initial purchasers to purchase up to an additional $25,000 aggregate principal amount of Convertible Notes to cover over-allotments, which was subsequently fully exercised during March 2021, resulting in a total issuance of $250,000 aggregate principal amount of Convertible Notes. The Convertible Notes will mature on March 1, 2028, unless earlier converted, redeemed or repurchased in certain circumstances. Upon conversion, the Company pays or delivers, as the case may be, cash, shares of Class A common stock or a combination of cash and shares of Class A common stock, at the Company's election.

The Convertible Notes are convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding December 1, 2027, only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ending on June 30, 2021 (and only during such fiscal quarter), ~~which, among other things, provides~~if the last reported sale price of the Company's Class A common stock, par value $0.001 per share, for ~~modified financial covenant compliance requirements for~~at least 20 trading days (whether or not consecutive) during a period of ~~time. The First Amendment requires us~~30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to ~~maintain minimum liquidity~~130% of ~~$25,000 through July 1, 2021 and outstanding borrowings~~the conversion price for the Convertible Notes on each applicable trading day; (2) during the ~~applicable~~five business day period ~~covered by~~after any ten consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per one thousand dollar principal amount of the Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of Class A common stock and the conversion rate for the Convertible Notes on each such trading day; (3) if the Company calls such Convertible Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the Convertible Notes called (or deemed called) for redemption; and (4) upon the occurrence of specified corporate events as set forth in the Indenture. On or after December 1, 2027, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Convertible Notes may convert all or any portion of their Convertible Notes at any time, regardless of the foregoing circumstances.

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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.

Shake Shack may not redeem the ~~First Amendment bear~~Convertible Notes prior to March 6, 2025. The Company may redeem for cash all or any portion of the Convertible Notes, at the Company's option, on or after March 6, 2025 if the last reported sale price of Class A common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid special interest, ~~at either: (i) LIBOR plus a percentage ranging from 1.0%~~if any, to, ~~2.5% or (ii)~~but excluding, the ~~base rate plus a percentage ranging from 0.0% to 1.50%, in each case depending on our net lease adjusted leverage ratio.~~redemption date.

In addition, if Shake Shack undergoes a fundamental change (as defined in the indenture governing the Convertible Notes), subject to certain conditions, holders may require it to repurchase for cash all or any portion of their Convertible Notes at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid special interest, if any, to, but excluding, the fundamental change repurchase date. In addition, following certain corporate events that occur prior to the maturity date of the Convertible Notes or if the Company delivers a notice of redemption in respect of some or all of the Convertible Notes, the Company will, in certain circumstances, increase the conversion rate of the Convertible Notes for a holder who elects to convert the Convertible Notes in connection with such a corporate event or convert the Convertible Notes called (or deemed called) for redemption during the related redemption period, as the case may be.

Contemporaneously with the issuance of the Convertible Notes, Shake Shack Inc. entered into an intercompany note with SSE Holdings (“Intercompany Note”). SSE Holdings promises to pay Shake Shack Inc., for value received, the principal amount with interest of the Intercompany Note in March ~~2020, we drew down~~2028. Shake Shack Inc. will exercise its right to convert the ~~full $50,000 available under~~Intercompany Note to maintain at all times a one-to-one ratio between the ~~Revolving Credit Facility to enhance liquidity~~number of common units, directly or indirectly, held by Shake Shack Inc. and ~~financial flexibility given~~ the ~~uncertain market conditions created by~~aggregate number of outstanding shares of common stock.

As of June 30, 2021, the ~~COVID-19 pandemic. We repaid this amount in full, plus~~Convertible Notes had a gross principal balance of $250,000 and a balance of $243,019, net of unamortized discount and debt issuance costs of $6,981. As of June 30, 2021, the unamortized balance of discount and debt issuance costs was recorded as a contra-liability and netted with Long-term debt on the Condensed Consolidated Balance Sheets and was being amortized as interest ~~in June 2020.~~

expense using the effective interest method. Total ~~interest costs incurred were $442~~amortization expense was $257 and ~~$554~~$343 respectively, for ~~the~~ thirteen and twenty-six weeks ended June ~~24, 2020, respectively,~~30, 2021 and ~~$97~~was included in Interest expense in the Condensed Consolidated Statements of Income (Loss). In connection with the Convertible Notes, the Company also incurred consulting and ~~$169~~advisory fees of $236 for the ~~thirteen and~~ twenty-six weeks ended June ~~26, 2019, respectively. NaN amounts were capitalized into property~~30, 2021 and ~~equipment for~~was included in General and administrative expense in the ~~thirteen~~Condensed Consolidated Statements of Income (Loss).

At June 30, 2021, the fair value of the Convertible Notes was approximately $237,188, based on external pricing data, including available quoted market prices of these instruments, and ~~twenty-six weeks ended June 24, 2020~~consideration of comparable debt instruments with similar interest rates and ~~June 26, 2019.~~

~~Paycheck Protection Program~~

~~In April 2020, we entered into~~trading frequency, among other factors, and is classified as a ~~$10,000 note payable with J.P. Morgan pursuant to~~Level 2 measurement within the ~~Paycheck Protection Program (“PPP Loan”) under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and returned the entire outstanding balance plus interest in April 2020.~~fair value hierarchy.

NOTE 9:7: LEASES

Nature of Leases

~~We lease~~Shake Shack currently leases all of ~~our~~its domestic ~~company-operated~~Company-operated Shacks, ~~our~~the home office and certain equipment under various non-cancelable lease agreements that expire on various dates through ~~2035. We evaluate~~2038. 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. ~~We evaluate~~The Company evaluates whether ~~we control~~it controls the use of the asset, which is determined by assessing whether ~~we obtain~~ substantially all economic benefits from the use of the asset is obtained, and whether ~~we have~~the Company has the right to direct the use of the asset. If these criteria are met and ~~we have~~the Company has identified a lease, ~~we account for~~ the contract is accounted for under the requirements of Accounting Standards Codification Topic ~~842 ("ASC 842").~~842.

Upon the possession of a leased asset, ~~we determine~~the Company determines its classification as an operating or finance lease. ~~Our~~The real estate leases are classified as operating leases and most of ~~our~~the equipment leases are classified as finance leases. Generally, ~~our~~the real estate leases have initial terms ranging from 10 to 15 years and typically include 2 five-year renewal options. Renewal

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options are generally not recognized as part of the right-of-use assets and lease liabilities as it is not reasonably certain at commencement date that wethe Company would exercise the options to extend the lease. ~~Our~~The real estate leases typically provide for fixed minimum rent payments and/or contingent rent payments based upon sales in excess of specified thresholds. When the achievement of such sales thresholds isare deemed to be probable, contingent rent is accrued in proportion to the sales recognized during the period. ~~For operating leases that include~~Fixed minimum rent ~~holidays and rent escalation clauses, we recognize lease expense~~payments are recognized on a straight-line basis over the lease term from the date ~~we take~~the Company takes possession of the leased property. Lease expense incurred before a Shack opens is recorded in ~~pre-opening costs.~~Pre-opening costs on the Condensed Consolidated Statements of Income (Loss). Once a domestic ~~company-operated~~Company-operated Shack opens, ~~we record~~ the straight-line lease expense and any contingent rent, if applicable, is recorded in ~~occupancy~~Occupancy and related expenses on the Condensed Consolidated Statements of Income (Loss). Many of ~~our~~the leases also require usthe Company to pay real estate taxes, common area maintenance costs and other occupancy costs which are included in ~~occupancy~~Occupancy and related expenses on the Condensed Consolidated Statements of Income (Loss).

As there ~~were~~are no explicit rates provided in ~~our~~the leases, ~~we used our~~the Company uses its incremental borrowing rate in determining the present value of future lease payments. The discount rate used to measure the lease liability ~~at the transition date was~~is derived from the average of the yield curves obtained from using the notching method and the recovery rate method. The most significant assumption in calculating the incremental borrowing rate is ~~our~~the Company's credit rating and is subject to judgment. ~~We determined our~~The credit rating ~~based on~~is determined by a comparison of the financial information of SSE Holdings to other public companies and then ~~used~~use their respective credit ratings to develop ~~our own.~~the Company's rate.

~~We expend~~The Company expends cash for leasehold improvements to build out and equip ~~our~~the leased premises. Generally, a portion of the leasehold improvements and building costs are reimbursed by ~~our~~the landlords as landlord incentives pursuant to agreed-upon terms in ~~our~~the lease agreements. If obtained, landlord incentives usually take the form of cash, full or partial credits against ~~our~~ future minimum or contingent rents otherwise payable by ~~us,~~the Company, or a combination thereof. In most cases, landlord incentives are received after ~~we take~~the Company takes possession of the property, as ~~we meet~~ required milestones are met during the construction of the property. ~~We include~~The Company includes these

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amounts in the measurement of the initial operating lease liability, which are also reflected as a reduction to the initial measurement of the right-of-use asset.

A summary of finance and operating lease right-of-use assets and liabilities as of June ~~24, 2020~~30, 2021 and December ~~25, 2019~~30, 2020 is as follows:

Classification June 24
2020 December 25
2019
Finance leases Property and equipment, net $ 5,248 $ 5,444
Operating leases Operating lease assets 298,602 274,426
Total right-of-use assets $ 303,850 $ 279,870
Finance leases:
Other current liabilities $ 1,802 $ 1,873
Other long-term liabilities 3,559 3,643
Operating leases:
Operating lease liabilities, current 37,082 30,002
Long-term operating lease liabilities 332,751 304,914
Total lease liabilities $ 375,194 $ 340,432

~~The components of lease expense for the thirteen and twenty-six weeks ended June 24, 2020 and June 26, 2019 was as follows:~~

Thirteen Weeks Ended Twenty-Six Weeks Ended
Classification June 24
2020 June 26
2019 June 24
2020 June 26
2019
Finance lease cost:
Amortization of right-of-use assets Depreciation expense $ 602 $ 619 $ 1,179 $ 953
Interest on lease liabilities Interest expense 55 55 110 96
Operating lease cost Occupancy and related expenses
General and administrative expenses
Pre-opening costs 11,478 9,855 22,220 18,765
Short-term lease cost Occupancy and related expenses 69 17 193 34
Variable lease cost Occupancy and related expenses
General and administrative expenses
Pre-opening costs 4,087 3,836 7,817 7,298
Total lease cost $ 16,291 $ 14,382 $ 31,519 $ 27,146


	Classification	June 30 2021		December 30 2020
Finance leases	Property and equipment, net	$	6,479	$	5,409
Operating leases	Operating lease assets	326,744		306,317
Total right-of-use assets		$	333,223	$	311,726




Finance leases:
	Other current liabilities	$	2,553	$	1,998
	Other long-term liabilities	4,122		3,586
Operating leases:
	Operating lease liabilities, current	36,677		35,657
	Long-term operating lease liabilities	363,482		343,736
Total lease liabilities		$	406,834	$	384,977

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The components of lease expense for the thirteen and twenty-six weeks ended June 30, 2021 and June 24, 2020 was as follows:


			Thirteen Weeks Ended				Twenty-Six Weeks Ended
		Classification	June 30 2021		June 24 2020		June 30 2021		June 24 2020
Finance lease cost:
	Amortization of right-of-use assets	Depreciation and amortization expense	$	675	$	602	$	1,288	$	1,179
	Interest on lease liabilities	Interest expense	57		55		111		110
Operating lease cost		Occupancy and related expenses Pre-opening costs General and administrative expenses	12,386		11,478		24,716		22,220
Short-term lease cost		Occupancy and related expenses	67		69		149		193
Variable lease cost		Occupancy and related expenses Pre-opening costs General and administrative expenses	3,358		4,087		6,209		7,817
Total lease cost			$	16,543	$	16,291	$	32,473	$	31,519

As of June ~~24, 2020,~~30, 2021, future minimum lease payments for finance and operating leases consisted of the following:


		Finance Leases		Operating Leases			Finance Leases		Operating Leases
2020		$	1,051	$	21,424
2021	2021	1,765		47,721		2021	$	1,449	$	21,836
2022	2022	1,284		52,463		2022	2,427		50,788
2023	2023	823		52,737		2023	1,537		58,678
2024	2024	496		51,697		2024	826		58,498
2025						2025	526		57,461
Thereafter	Thereafter	337		262,345		Thereafter	379		271,963
Total minimum payments	Total minimum payments	5,756		488,387		Total minimum payments	7,144		519,224
Less: imputed interest	Less: imputed interest	395		118,553		Less: imputed interest	469		119,065
Total lease liabilities	Total lease liabilities	$	5,361	$	369,833	Total lease liabilities	$	6,675	$	400,159

As of June ~~24, 2020 we~~30, 2021 the Company had additional operating lease commitments of ~~$53,952~~$51,706 for non-cancelable leases without a possession date, which ~~will~~ begin to commence in ~~2020.~~2021. These lease commitments are consistent with the leases that we have been executed thus ~~far and include a number of real estate leases where we are involved in the construction and design.~~far.

A summary of lease terms and discount rates for finance and operating leases as of June ~~24, 2020~~30, 2021 and December ~~25, 2019~~30, 2020 is as follows:


			June 24 2020		December 25 2019				June 30 2021		December 30 2020
Weighted-average remaining lease term (years):	Weighted-average remaining lease term (years):							Weighted-average remaining lease term (years):
		Finance leases	5.1		5.1		Finance leases		5.4		5.2
		Operating leases	10.1		10.1		Operating leases		9.6		9.7
Weighted-average discount rate:	Weighted-average discount rate:							Weighted-average discount rate:
		Finance leases	3.6	%	3.7	%	Finance leases		3.6	%	3.6	%
		Operating leases	4.0	%	5.4	%	Operating leases		3.7	%	4.2	%

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Supplemental cash flow information related to leases for the twenty-six weeks ended June ~~24, 2020~~30, 2021 and June ~~26, 2019~~24, 2020 is as follows:


			Twenty-Six Weeks Ended								Twenty-Six Weeks Ended
			June 24 2020		June 26 2019				June 30 2021		June 24 2020
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:							Cash paid for amounts included in the measurement of lease liabilities:
		Operating cash flows from finance leases	$	110	$	148	Operating cash flows from finance leases		$	111	$	110
		Operating cash flows from operating leases	15,799		27,238		Operating cash flows from operating leases		23,367		15,799
		Financing cash flows from finance leases	1,150		1,433		Financing cash flows from finance leases		1,272		1,150
Right-of-use assets obtained in exchange for lease obligations:	Right-of-use assets obtained in exchange for lease obligations:							Right-of-use assets obtained in exchange for lease obligations:
		Finance leases	1,020		1,927		Finance leases		2,358		1,020
		Operating leases	30,982		65,773		Operating leases		34,929		30,982

NOTE ~~10:~~8: NON-CONTROLLING INTERESTS

~~We are~~Shake Shack is the sole managing member of SSE Holdings and, as a result, ~~consolidate~~consolidates the financial results of SSE Holdings. ~~We report~~The Company reports a non-controlling interest representing the economic interest in SSE Holdings held by the other members of SSE Holdings. The Third Amended and Restated Limited Liability Company Agreement, as further amended, (the "LLC Agreement") of SSE Holdings provides that holders of LLC Interests may, from time to time, require SSE Holdings to redeem all or a portion of their LLC Interests for newly-issued shares of Class A common stock on a one-for-one basis. In connection with any redemption or

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exchange, wethe Company will receive a corresponding number of LLC Interests, increasing ~~our~~the total ownership interest in SSE Holdings. Changes in ~~our~~the ownership interest in SSE Holdings while ~~we retain our~~the Company retains its controlling interest in SSE Holdings will be accounted for as equity transactions. As such, future redemptions or direct exchanges of LLC Interests in SSE Holdings by the other members of SSE Holdings will result in a change in ownership and reduce the amount recorded as non-controlling interest and increase additional paid-in capital.

On April 17, 2020, we announced an “at-the-market” equity offering program (the “ATM Program”), under which we may offer and sell shares of our Class A common stock having an aggregate price of up to $75,000 from time to time. On April 21, 2020, we completed the sale of 233,467 shares of our Class A common stock pursuant to the ATM Program and received $9,794 of proceeds, net of commissions. The proceeds were used to purchase newly-issued LLC Interests.

On April 21, 2020, we completed an underwritten offering of 3,416,070 shares of our Class A common stock, resulting in $135,857 of proceeds, net of underwriting discounts and commissions. The proceeds were used to purchase newly-issued LLC Interests.

The following table summarizes the ownership interest in SSE Holdings as of June ~~24, 2020~~30, 2021 and December ~~25, 2019.~~30, 2020.


		June 24, 2020				December 25, 2019						June 30, 2021			December 30, 2020
		LLC Interests	Ownership%		LLC Interests	Ownership %			LLC Interests	Ownership %		LLC Interests	Ownership %
Number of LLC Interests held by Shake Shack Inc.	Number of LLC Interests held by Shake Shack Inc.	38,236,538	92.5	%	34,417,302	91.6	%	Number of LLC Interests held by Shake Shack Inc.	39,134,356	93.1	%	38,717,790	92.9	%
Number of LLC Interests held by non-controlling interest holders	Number of LLC Interests held by non-controlling interest holders	3,117,002	7.5	%	3,145,197	8.4	%	Number of LLC Interests held by non-controlling interest holders	2,921,587	6.9	%	2,951,188	7.1	%
Total LLC Interests outstanding	Total LLC Interests outstanding	41,353,540	100.0	%	37,562,499	100.0	%	Total LLC Interests outstanding	42,055,943	100.0	%	41,668,978	100.0	%

The weighted average ownership percentages for the applicable reporting periods are used to attribute ~~net~~Net income (loss) and ~~other~~Other comprehensive income (loss) to Shake Shack Inc. and the non-controlling interest holders. The non-controlling interest holders' weighted average ownership percentage for the thirteen and twenty-six weeks ended June ~~24, 2020~~30, 2021 was ~~7.7% and 8.0%, respectively.~~7.0%. The non-controlling interest holders' weighted average ownership percentage for the thirteen and twenty-six weeks ended June ~~26, 2019 was 19.0% and 19.7%, respectively.~~

~~The following table summarizes the effects of changes in ownership of SSE Holdings on our equity during the thirteen and twenty-six weeks ended June~~ 24, 2020 was 7.7% and ~~June 26, 2019.~~8.0%, respectively.

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Thirteen Weeks Ended Twenty-Six Weeks Ended
June 24
2020 June 26
2019 June 24
2020 June 26
2019
Net income (loss) attributable to Shake Shack Inc. $ (16,211) $ 9,030 $ (17,171) $ 11,576
Transfers (to) from non-controlling interests:
Increase in additional paid-in capital as a result of the redemption of LLC Interests — 4,886 195 5,480
Increase (decrease) in additional paid-in capital as a result of activity under stock compensation plans and the related income tax effect (164) (43) 260 932
Increase in additional paid-in-capital as a result of the issuance of Class A common stock sold in equity offerings 135,718 — 135,718 —
Total effect of changes in ownership interest on equity attributable to Shake Shack Inc. $ 119,343 $ 13,873 $ 119,002 $ 17,988
The following table summarizes the effects of changes in ownership of SSE Holdings on the Company's equity during the thirteen and twenty-six weeks ended June 30, 2021 and June 24, 2020.


		Thirteen Weeks Ended				Twenty-Six Weeks Ended
		June 30 2021		June 24 2020		June 30 2021		June 24 2020
Net income (loss) attributable to Shake Shack Inc.		$	1,944	$	(16,211)	$	3,253	$	(17,171)


Transfers (to) from non-controlling interests:


	Increase (decrease) in additional paid-in capital as a result of the redemption of LLC Interests	(3)		0		33		195


	Increase (decrease) in additional paid-in capital as a result of activity under stock compensation plans and the related income tax effects	(788)		(164)		2,571		260
	Increase in additional paid-in-capital as a result of the issuance of Class A common stock sold in equity offerings	0		135,718		0		135,718
Total effect of changes in ownership interest on equity attributable to Shake Shack Inc.		$	1,153	$	119,343	$	5,857	$	119,002

The following table summarizes redemptions of LLC Interests activity during the thirteen and twenty-six weeks ended June ~~24, 2020~~30, 2021 and June ~~26, 2019.~~24, 2020.


			Thirteen Weeks Ended						Twenty-Six Weeks Ended								Thirteen Weeks Ended				Twenty-Six Weeks Ended
				June 24 2020		June 26 2019		June 24 2020		June 26 2019				June 30 2021		June 24 2020		June 30 2021		June 24 2020
Redemption and acquisition of LLC Interests	Redemption and acquisition of LLC Interests											Redemption and acquisition of LLC Interests
		Number of LLC Interests redeemed by non-controlling interest holders	—		722,306		28,195		826,138		Number of LLC Interests redeemed by non-controlling interest holders		1		0		29,601		28,195

		Number of LLC Interests received by Shake Shack Inc.	—		722,306		28,195		826,138		Number of LLC Interests received by Shake Shack Inc.		1		0		29,601		28,195
Issuance of Class A common stock	Issuance of Class A common stock											Issuance of Class A common stock
		Shares of Class A common stock issued in connection with redemptions of LLC Interests	—		722,306		28,195		826,138		Shares of Class A common stock issued in connection with redemptions of LLC Interests		1		0		29,601		28,195

Cancellation of Class B common stock	Cancellation of Class B common stock											Cancellation of Class B common stock
		Shares of Class B common stock surrendered and canceled	—		722,306		28,195		826,138		Shares of Class B common stock surrendered and canceled		1		0		29,601		28,195

During the thirteen and twenty-six weeks ended June ~~24, 2020, we~~30, 2021 the Company received an aggregate of ~~63,601~~31,116 and ~~141,504~~386,965 LLC Interests, respectively, in connection with the activity under ~~our~~its stock compensation plan and ~~137,151~~63,601 and ~~210,714~~141,504 LLC Interests, respectively, during the thirteen and twenty-six weeks ended June ~~26, 2019.~~24, 2020.

NOTE ~~11:~~9: EQUITY-BASED COMPENSATION

A summary of equity-based compensation expense recognized during the thirteen and twenty-six weeks ended June ~~24, 2020~~30, 2021 and June ~~26, 2019~~24, 2020 is as follows:


		Thirteen Weeks Ended									Twenty-Six Weeks Ended										Thirteen Weeks Ended						Twenty-Six Weeks Ended
		June 24 2020			June 26 2019			June 24 2020			June 26 2019				June 30 2021			June 24 2020			June 30 2021			June 24 2020
Stock options	Stock options		$	26		$	655		$	287		$	1,337	Stock options		$	(17)		$	26		$	3		$	287
Performance stock units	Performance stock units		363			1,007			776			1,719		Performance stock units		783			363			1,197			776
Restricted stock units	Restricted stock units		1,030			518			1,656			816		Restricted stock units		1,192			1,030			2,439			1,656
Equity-based compensation expense	Equity-based compensation expense		$	1,419		$	2,180		$	2,719		$	3,872	Equity-based compensation expense		$	1,958		$	1,419		$	3,639		$	2,719

Total income tax benefit recognized related to equity-based compensation	Total income tax benefit recognized related to equity-based compensation		$	39		$	51		$	75		$	93	Total income tax benefit recognized related to equity-based compensation		$	63		$	39		$	130		$	75

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Equity-based compensation expense is included in ~~general~~General and administrative expenses and ~~labor~~Labor and related expenses on the Condensed Consolidated Statements of Income (Loss) during the thirteen and twenty-six weeks ended June ~~24, 2020~~30, 2021 and June ~~26, 2019~~24, 2020 as follows:


		Thirteen Weeks Ended									Twenty-Six Weeks Ended										Thirteen Weeks Ended						Twenty-Six Weeks Ended
		June 24 2020			June 26 2019			June 24 2020			June 26 2019				June 30 2021			June 24 2020			June 30 2021			June 24 2020
General and administrative expenses	General and administrative expenses		$	1,268		$	2,084		$	2,482		$	3,726	General and administrative expenses		$	1,723		$	1,268		$	3,264		$	2,482
Labor and related expenses	Labor and related expenses		151			96			237			146		Labor and related expenses		235			151			375			237
Equity-based compensation expense	Equity-based compensation expense		$	1,419		$	2,180		$	2,719		$	3,872	Equity-based compensation expense		$	1,958		$	1,419		$	3,639		$	2,719

NOTE ~~12:~~10: INCOME TAXES

~~We are~~Shake Shack is the sole managing member of SSE Holdings and, as a result, ~~consolidate~~consolidates the financial results of SSE Holdings. SSE Holdings is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, SSE Holdings is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by SSE Holdings is passed through to and included in the taxable income or loss of its members, including ~~us,~~the Company, on a pro rata basis. ~~We are~~The Company is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to ~~our~~its allocable share of any taxable income or loss of SSE Holdings, as well as any stand-alone income or loss generated by Shake Shack Inc. ~~We are~~The Company is also subject to withholding taxes in foreign jurisdictions.

~~Income Tax Expense~~

~~A reconciliation of income tax expense computed at the U.S. federal statutory income tax rate to the recognized income tax expense is as follows:~~

Thirteen Weeks Ended Twenty-Six Weeks Ended
June 24
2020 June 26
2019 June 24
2020 June 26
2019
Expected U.S. federal income taxes at statutory rate $ (5,065) 21.0 % $ 2,567 21.0 % $ (5,274) 21.0 % $ 3,754 21.0 %
State and local income taxes, net of federal benefit (1,576) 6.5 % 823 6.7 % (1,701) 6.8 % 1,242 6.9 %
Foreign withholding taxes (325) 1.3 % 627 5.1 % 210 (0.8) % 969 5.4 %
Tax credits (393) 1.6 % (1,446) (11.7) % (427) 1.7 % (1,822) (10.2) %
Non-controlling interest 501 (2.0) % (623) (5.1) % 421 (1.7) % (947) (5.3) %
Tax effect of change in basis related to the adoption of ASC 842 — — % — — % — — % 1,161 6.5 %
Change in valuation allowance 749 (3.1) % (895) (7.3) % 749 (3.0) % (1,261) (7.1) %
Other 17 — % (3) 0.1 % 17 (0.1) % 1 — %
Income tax expense $ (6,092) 25.3 % $ 1,050 8.6 % $ (6,005) 23.9 % $ 3,097 17.3 %

~~Our~~The effective income tax rates for the thirteen weeks ended June 30, 2021 and June 24, 2020 were 32.4% and ~~June 26, 2019 were~~ 25.3% ~~and 8.6%~~, respectively. The increase was primarily driven by ~~lower~~higher pre-tax book income resulting in income and higher foreign withholding taxes, partially offset by a ~~loss, causing the tax credits to have an increasing effect on the tax rate, as well as the recognition~~reduction of a valuation ~~allowance against foreign tax credits that are not expected to be realized before the expiration of the carryforward period.~~allowance. Additionally, an increase in ~~our~~the Company's ownership interest in SSE Holdings increases ~~our~~its share of the taxable income (loss) of SSE Holdings. ~~Our~~The weighted-average ownership interest in SSE Holdings was ~~92.3%~~93.0% and ~~81.0%~~92.3% for the thirteen weeks ended June 30, 2021 and June 24, 2020, ~~and June 26, 2019,~~ respectively.

~~Our~~The effective income tax rates for the twenty-six weeks ended June 30, 2021 and June 24, 2020 were 135.4% and ~~June 26, 2019 were~~ 23.9% ~~and 17.3%~~, respectively. The increase was primarily driven by lower pre-tax book income resulting in a loss, causing the tax credits to have an increasing effect on the tax rate, as well as the recognition of a valuation allowance against foreign tax credits that are not expected to be realized before the expiration of the carryforward period. These were partially offset by a reduction in the tax effect of changes related to the adoption of new accounting standards, for which there were none during the twenty-six weeks

~~Shake Shack Inc.~~ ~~Form 10-Q~~ | 21

~~Table of Contents~~

~~ended June 24, 2020. Additionally, as noted above, an increase in our ownership interest in SSE Holdings increases our share of the taxable income (loss) of SSE Holdings. Our~~Company's weighted-average ownership interest in SSE Holdings was ~~92.0%~~93.0% and ~~80.3%~~92.0% for the twenty-six weeks ended June ~~24, 2020~~30, 2021 and June ~~26, 2019,~~24, 2020, respectively.

Deferred Tax Assets and Liabilities

During the twenty-six weeks ended June ~~24, 2020, we~~30, 2021, the Company acquired an aggregate of ~~169,699~~416,566 LLC Interests in connection with the redemption of LLC Interests, and activity relating to ~~our~~its stock compensation ~~plan, and in connection with the second quarter equity offering. We~~plan. The Company recognized a deferred tax asset in the amount of ~~$1,297~~$10,608 associated with the basis difference in ~~our~~its investment in SSE Holdings upon acquisition of these LLC Interests. As of June ~~24, 2020,~~30, 2021, the total deferred tax asset related to the basis difference in ~~our~~the Company's investment in SSE Holdings was ~~$172,350.~~$135,176. However, a portion of the total basis difference will only reverse upon the eventual sale of ~~our~~its interest in SSE Holdings, which ~~we expect~~the Company expects would result in a capital loss.As of June ~~24, 2020,~~30, 2021, the total valuation allowance established against the deferred tax asset to which this portion relates was ~~$104.~~$1,470.

During the twenty-six weeks ended June ~~24, 2020, we~~30, 2021, the Company also recognized ~~$88~~$300 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. ~~See "—Tax~~Refer to "Tax Receivable ~~Agreement"~~Agreement," herein for ~~more~~additional information.

~~We evaluate~~The Company evaluates the realizability of ~~our~~its deferred tax assets on a quarterly basis and ~~establish~~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 June ~~24, 2020, we~~30, 2021, the Company concluded, based on the weight of all available positive and negative evidence, that all of ~~our~~its deferred tax assets (except for those deferred tax assets described above relating to basis differences that are expected to result in a capital loss upon ~~the~~ eventual sale of ~~our~~its interest in SSE Holdings, ~~and~~ New York City UBT credits and certain foreign tax credits) are more likely than not to be realized. As such, an0 additional valuation allowance ~~of $749~~ was ~~recognized on certain foreign tax credits not expected to be realized before the expiration of the carryforward period.~~recognized.

~~Uncertain Tax Positions~~

~~NaN uncertain tax positions existed as of June 24, 2020.~~

Shake Shack Inc. ~~was formed in September 2014 and did not engage in any operations prior to our initial public offering in February~~

Form 10-Q | 21

Table of 2015 and related organizational transactions. Shake Shack Inc. first filed tax returns for tax year 2014, which is the first tax year subject to examination by taxing authorities for U.S. federal and state income tax purposes. Additionally, although SSE Holdings is treated as a partnership for U.S. federal and state income taxes purposes, it is still required to file an annual U.S. Return of Partnership Income, which is subject to examination by the Internal Revenue Service ("IRS"). The statute of limitations has expired for tax years through 2015 for SSE Holdings.Contents

Tax Receivable Agreement

Pursuant to ~~our~~the Company's election under Section 754 of the Internal Revenue Code (the "Code"), ~~we expect~~the Company expects to obtain an increase in ~~our~~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. ~~We plan~~The Company plans to make an election under Section 754 of the Code for each taxable year in which a redemption or exchange of LLC Interest occurs. ~~We intend~~The Company intends to treat any redemptions and exchanges of LLC Interests as direct purchases of LLC Interests for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that we would otherwise ~~pay~~be paid in the future to various tax authorities. 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.

On February 4, 2015, wethe 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 usthe Company of 85% of the amount of any tax benefits that weare actually ~~realize,~~realized, or in some cases are deemed to realize, as a result of (i) increases in ~~our~~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"). ~~We expect~~The Company expects to benefit from the remaining 15% of any tax benefits that we may actually realize. The TRA Payments are not conditioned upon any continued ownership interest in SSE Holdings or ~~us.~~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 twenty-six weeks ended June ~~24, 2020, we~~30, 2021, the Company acquired an aggregate of ~~28,195~~29,601 LLC Interests in connection with the redemption of LLC Interests, which resulted in an increase in the tax basis of ~~our~~its investment in SSE Holdings subject to the

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~~Table of Contents~~

provisions of the Tax Receivable Agreement. WeThe Company recognized an additional liability in the amount of ~~$313~~$1,094 for the TRA Payments due to the redeeming members, representing 85% of the aggregate tax benefits ~~we expect~~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 ~~our~~ estimates of future taxable income. During the twenty-six weeks ended June 30, 2021, the Company made 0 payments to the parties to the Tax Receivable Agreement. During the twenty-six weeks ended June 24, 2020, ~~and June 26, 2019,~~ payments of $6,643, ~~and $707,~~ inclusive of interest, were made to the parties to the Tax Receivable ~~Agreement, respectively.~~Agreement. As of June ~~24, 2020,~~30, 2021, the total amount of TRA Payments due under the Tax Receivable Agreement, was ~~$228,096, of which $0 was included in other current liabilities on the Condensed Consolidated Balance Sheet. See~~$234,049. Refer to Note 1513, Commitments and Contingencies, for ~~more~~additional information relating to ~~our~~the liabilities under the Tax Receivable Agreement.

~~CARES Act~~

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) to provide certain relief as a result of the COVID-19 pandemic. The CARES Act provides tax relief, along with other stimulus measures, including a retroactive technical correction of prior tax legislation for tax depreciation of certain qualified improvement property, among other changes.

We are currently estimating the amount of accelerated tax depreciation deductions as a result of the technical amendments made by the CARES Act to qualified improvement property. During the thirteen weeks ended June 24, 2020, we recognized accelerated tax depreciation deductions of $171 related to assets placed in service in fiscal 2020, and are recorded as components within our deferred income taxes, net on the Condensed Consolidated Balance Sheets. The impact of assets placed into service during fiscal 2018 and fiscal 2019 will be reflected in our third quarter provision. In addition, subsequent to the second quarter of 2020, we began deferring the employer-paid portion of social security taxes as permitted by the CARES Act.

NOTE ~~13:~~11: EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share of Class A common stock is computed by dividing net income (loss) attributable to Shake Shack Inc. by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings (loss) (loss) per share of Class A common stock is computed by dividing net income (loss) attributable to Shake Shack Inc. by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings (loss) ~~(loss)~~ per share of Class A common stock (in thousands, except per share amounts) for the thirteen and twenty-six weeks ended June ~~24, 2020~~30, 2021 and June ~~26, 2019.~~

Thirteen Weeks Ended Twenty-Six Weeks Ended
June 24
2020 June 26
2019 June 24
2020 June 26
2019
Numerator:
Net income (loss) $ (18,031) $ 11,171 $ (19,110) $ 14,778
Less: net income (loss) attributable to non-controlling interests (1,820) 2,141 (1,939) 3,202
Net income (loss) attributable to Shake Shack Inc. $ (16,211) $ 9,030 $ (17,171) $ 11,576
Denominator:
Weighted-average shares of Class A common stock outstanding—basic 37,309 30,122 35,876 29,842
Effect of dilutive securities:
Stock options — 775 — 753
Performance stock units — 68 — 72
Restricted stock units — 50 — 36
Weighted-average shares of Class A common stock outstanding—diluted 37,309 31,015 35,876 30,703
Earnings (loss) per share of Class A common stock—basic $ (0.43) $ 0.30 $ (0.48) $ 0.39
Earnings (loss) per share of Class A common stock—diluted $ (0.43) $ 0.29 $ (0.48) $ 0.38
24, 2020.

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Form 10-Q | 23

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			Thirteen Weeks Ended				Twenty-Six Weeks Ended
			June 30 2021		June 24 2020		June 30 2021		June 24 2020
Numerator:
	Net income (loss) attributable to Shake Shack Inc.—basic		$	1,944	$	(16,211)	$	3,253	$	(17,171)
	Reallocation of net income (loss) attributable to non-controlling interests from the assumed conversion of Class B shares		121		0		(613)		0
	Net income (loss) attributable to Shake Shack Inc.—diluted		$	2,065	$	(16,211)	$	2,640	$	(17,171)
Denominator:
	Weighted-average shares of Class A common stock outstanding—basic		39,114		37,309		39,031		35,876
	Effect of dilutive securities:
		Stock options	133		0		182		0
		Performance stock units	35		0		44		0
		Restricted stock units	118		0		141		0
		Convertible Notes	1,467		0		959		0
		Shares of Class B common stock	2,922		0		2,932		0
	Weighted-average shares of Class A common stock outstanding—diluted		43,789		37,309		43,289		35,876

Earnings (loss) per share of Class A common stock—basic			$	0.05	$	(0.43)	$	0.08	$	(0.48)
Earnings (loss) per share of Class A common stock—diluted			$	0.05	$	(0.43)	$	0.06	$	(0.48)

Shares of ~~our~~ Class B common stock do not share in the earnings or losses of Shake Shack and are therefore not participating securities. As such, separate presentation of basic and diluted earnings (loss) per share of Class B common stock under the two-class method has not been presented. However, shares of Class B common stock outstanding for the period are considered potentially dilutive shares of Class A common stock under application of the if-converted method and are included in the computation of diluted earnings (loss) per share, except when the effect would be antidilutive.

The following table presents potentially dilutive securities, as of the end of the period, excluded from the computations of diluted earnings (loss) per share of Class A common stock for the thirteen and twenty-six weeks ended June ~~24, 2020~~30, 2021 and June ~~26, 2019.~~24, 2020.


		Thirteen Weeks Ended						Twenty-Six Weeks Ended									Thirteen Weeks Ended					Twenty-Six Weeks Ended
		June 24 2020	June 26 2019		June 24 2020		June 26 2019			June 30 2021			June 24 2020			June 30 2021		June 24 2020
Stock options	Stock options		813,488	(1)	—		813,488	(1)	—			Stock options	0		813,488	(2)		0		813,488	(2)
Performance stock units	Performance stock units		143,534	(1)	68,914	(2)	143,534	(1)	68,914		(2)	Performance stock units	46,768	(1)	143,534	(2)		46,768	(1)	143,534	(2)
Restricted stock units	Restricted stock units		265,293	(1)	—		265,293	(1)	—			Restricted stock units	0		265,293	(2)		0		265,293	(2)
Shares of Class B common stock	Shares of Class B common stock		3,117,002	(3)	6,731,209	(3)	3,117,002	(3)	6,731,209		(3)	Shares of Class B common stock	0		3,117,002	(2)		0		3,117,002	(2)

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

~~(2) 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.

~~(3) Shares~~(2)Number of ~~our Class B common stock~~securities outstanding ~~as of~~at the end of the period ~~are considered potentially dilutive shares of Class A common stock. Amounts have been~~that were excluded from the ~~computations~~computation of diluted earnings (loss) per share of Class A common stock because the effect would have been ~~anti-dilutive under the if-converted and two-class methods.~~anti-dilutive.

Shake Shack Inc.

Form 10-Q | 23

Table of Contents

NOTE ~~14:~~12: SUPPLEMENTAL CASH FLOW INFORMATION

The following table sets forth supplemental cash flow information for the twenty-six weeks ended June ~~24, 2020~~30, 2021 and June ~~26, 2019:~~24, 2020:

Twenty-Six Weeks Ended
June 24
2020 June 26
2019
Cash paid for:
Income taxes, net of refunds $ 775 $ 1,554
Interest, net of amounts capitalized 491 143
Non-cash investing activities:
Accrued purchases of property and equipment 5,405 14,072
Capitalized equity-based compensation 22 55
Non-cash financing activities:
Class A common stock issued in connection with the redemption of LLC Interests — 1
Cancellation of Class B common stock in connection with the redemption of LLC Interests — (1)
Establishment of liabilities under tax receivable agreement 313 14,395

~~24 |~~ ~~Shake Shack Inc.~~ ~~Form 10-Q~~


		Twenty-Six Weeks Ended
		June 30 2021		June 24 2020
Cash paid for:
	Income taxes, net of refunds	$	1,188	$	775
	Interest, net of amounts capitalized	143		491
Non-cash investing activities:
	Accrued purchases of property and equipment	13,627		5,405


	Capitalized equity-based compensation	29		22

Non-cash financing activities:





	Revolving Credit Facility amendment-related accrual	81		0
	Convertible Notes issuance-related accrual	388		0
	Establishment of liabilities under tax receivable agreement	1,094		313

~~Table of Contents~~

NOTE ~~15:~~13: COMMITMENTS AND CONTINGENCIES

Lease Commitments

~~We are~~The Company is obligated under various operating leases for Shacks and ~~our~~the home office space, expiring in various years through ~~2035.~~2038. Under certain of these leases, ~~we are~~the Company is liable for contingent rent based on a percentage of sales in excess of specified thresholds and are typically responsible for ~~our~~its proportionate share of real estate taxes, common area maintenance ~~charges~~costs and ~~utilities. See~~other occupancy costs. Refer to Note ~~9, Leases.~~7, Leases, for additional information.

As security under the terms of one of ~~our~~the leases, ~~we are~~the Company is obligated under a letter of credit totaling $130 as of June ~~24, 2020,~~30, 2021, which expires in February 2026. Additionally, in September 2017, wethe Company entered into a letter of credit in conjunction with ~~our~~the new home office lease in the amount of $603, which expires in August ~~2020~~2021 and renews automatically for one-year periods through January 31, 2034.

Purchase Commitments

Purchase obligations include legally binding contracts, including commitments for the purchase, construction or remodeling of real estate and facilities, firm minimum commitments for inventory purchases, equipment purchases, marketing-related contracts, software acquisition/license commitments and service contracts. These obligations are generally short-term in nature and are recorded as liabilities when the related goods are received or services rendered. WeThe Company also ~~enter~~enters into long-term, exclusive contracts with certain vendors to supply ~~us with~~ food, beverages and paper goods, obligating usthe Company to purchase specified quantities.

Legal Contingencies

In March 2020, a claim was filed against Shake Shack alleging certain violations of the Fair Labor Standards Act. At a mediation between the parties, the Company agreed to settle the matter with the plaintiff and other employees who elect to participate in the settlement for $619. As of June 30, 2021, a remaining accrual of $24 was recorded in Accrued expenses in the Condensed Consolidated Balance Sheets related to this matter.

In February 2018, a claim was filed against Shake Shack in California state court alleging certain violations of the California Labor Code. At a mediation between the parties, wethe Company agreed to settle the matter with the plaintiff and all other

24 | Shake Shack Inc.

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Table of Contents

California employees who elect to participate in the settlement for $1,200. ~~As of June 24, 2020, an accrual in the amount of $1,200 was recorded~~The Company accrued for this matter during the thirteen weeks ended September 26, 2018, and ~~related expenses.~~paid in full as of June 30, 2021.

~~We are~~The Company is subject to various legal proceedings, claims and liabilities, such as employment-related claims and slip and fall cases, which arise in the ordinary course of business and are generally covered by insurance. As of June ~~24, 2020,~~30, 2021, the amount of the ultimate liability with respect to these matters was not material.

Liabilities under Tax Receivable Agreement

As described in Note ~~12, we are~~10, Income Taxes, the Company is a party to the Tax Receivable Agreement under which ~~we are~~it is contractually committed to pay certain of the members of SSE Holdings 85% of the amount of any tax benefits that weare actually ~~realize,~~realized, or in some cases are deemed to realize, as a result of certain transactions. ~~We are~~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. If ~~we do~~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 weit would not be required to make the related TRA Payments. During the twenty-six weeks ended June 30, 2021 and June 24, 2020, ~~and June 26, 2019, we~~the Company recognized liabilities totaling ~~$313~~$1,094 and ~~$1,636,~~$313, respectively, relating to ~~our~~the obligations under the Tax Receivable Agreement, after concluding that it was probable that weit would have sufficient future taxable income over the term of the Tax Receivable Agreement to utilize the related tax benefits. As of June ~~24, 2020~~30, 2021 and December ~~25, 2019, our~~30, 2020, the total obligations under the Tax Receivable Agreement were ~~$228,096~~$234,049 and ~~$234,426,~~$232,954, respectively. There were no transactions subject to the Tax Receivable Agreement for which wethe Company did not recognize the related liability, as wethe Company concluded that weit would have sufficient future taxable income to utilize all of the related tax benefits.

~~Shake Shack Inc.~~ ~~Form 10-Q~~ | 25

~~Table of Contents~~

NOTE ~~16:~~14: RELATED PARTY TRANSACTIONS

Union Square Hospitality Group

The Chairman of ~~our~~the Board of Directors serves as the Chief Executive Officer of Union Square Hospitality Group, LLC. As a result, Union Square Hospitality Group, LLC and its subsidiaries, set forth below, are considered related parties.

Hudson Yards Sports and Entertainment

In fiscal 2011, weShake Shack entered into a Master License Agreement (as amended, "MLA") with Hudson Yards Sports and Entertainment LLC ("HYSE") to operate Shake Shack branded limited menu concession stands in sports and entertainment venues within the United States. In February 2019, the agreement was assigned to Hudson Yards Catering ("HYC"), the parent of HYSE. The agreement expires in January 2027 and includes 5 consecutive five-year renewal options at HYC's option. As consideration for these rights, HYC pays usthe Company a license fee based on a percentage of net food sales, as defined in the MLA. HYC also pays us a percentage of profits on sales of branded beverages, as defined in the MLA.

Thirteen Weeks Ended Twenty-Six Weeks Ended
Classification June 24
2020 June 26
2019 June 24
2020 June 26
2019
Amounts received from HYC Licensing revenue $ 12 $ 85 $ 34 $ 151


		Thirteen Weeks Ended				Twenty-Six Weeks Ended
	Classification	June 30 2021		June 24 2020		June 30 2021		June 24 2020

Amounts received from HYC	Licensing revenue	$	58	$	12	$	58	$	34

Classification June 24
2020 December 25
2019
Amounts due from HYC Accounts Receivable $ 28 $ 47


	Classification	June 30 2021		December 30 2020

Amounts due from HYC	Accounts Receivable	$	0	$	8

Shake Shack Inc.

Form 10-Q | 25

Table of Contents

Madison Square Park Conservancy

The Chairman of ~~our~~the Board of Directors serves as a director of the Madison Square Park Conservancy ("MSP Conservancy"), with which ~~we have~~Shake Shack has a license agreement and ~~pay~~pays license fees to operate ~~our~~the Madison Square Park Shack. NaN amounts were due to MSP Conservancy as of both June 30, 2021 and December 30, 2020.

Thirteen Weeks Ended Twenty-Six Weeks Ended
Classification June 24
2020 June 26
2019 June 24
2020 June 26
2019
Amounts paid to MSP Conservancy Occupancy and related expenses $ — $ 276 $ 219 $ 554

Classification June 24
2020 December 25
2019
Amounts due to MSP Conservancy Accrued expenses $ 282 $ 53


		Thirteen Weeks Ended				Twenty-Six Weeks Ended
	Classification	June 30 2021		June 24 2020		June 30 2021		June 24 2020
Amounts paid to MSP Conservancy	Occupancy and related expenses	$	216	$	0	$	431	$	219

Olo, Inc.

The Chairman of ~~our~~the Board of Directors serves as a director of Olo, Inc. (formerly known as "Mobo Systems, Inc."), a platform ~~we use~~the Company uses in connection with ~~our~~its mobile ordering application. NaN amounts were due to Olo, Inc. as of both June ~~24, 2020~~30, 2021 and December ~~25, 2019, respectively.~~30, 2020.

Thirteen Weeks Ended Twenty-Six Weeks Ended
Classification June 24
2020 June 26
2019 June 24
2020 June 26
2019
Amounts paid to Olo Other operating expenses $ 42 $ 40 $ 94 $ 78


		Thirteen Weeks Ended				Twenty-Six Weeks Ended
	Classification	June 30 2021		June 24 2020		June 30 2021		June 24 2020
Amounts paid to Olo, Inc.	Other operating expenses	$	63	$	42	$	210	$	94

Square, Inc.

~~Our~~The Company's Chief Executive Officer is a member of the Board of Directors of Square, Inc. ("Square"). WeThe Company currently ~~use~~uses certain point-of-sale applications, payment processing services, hardware and other enterprise platform services in connection with the processing of a limited amount of sales at certain locations, sales for certain off-site events and in connection with its kiosk technology.


		Thirteen Weeks Ended				Twenty-Six Weeks Ended
	Classification	June 30 2021		June 24 2020		June 30 2021		June 24 2020
Amounts paid to Square	Other operating expenses	$	754	$	218	$	1,216	$	789


	Classification	June 30 2021		December 30 2020
Amounts due to Square	Accounts Payable	$	21	$	—

USHG Acquisition Corp.

The Company's Chief Executive Officer has been appointed to the Board of Directors of USHG Acquisition Corp. in which the Chairman of the Board of Directors serves as the chairman of the board of directors of USHG Acquisition Corp. USHG Acquisition Corp. is a newly organized blank check company incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities. No amounts were due to or due from USHG Acquisition Corp as of both June 30, 2021 and December 30, 2020.

Tax Receivable Agreement

The Company entered into a 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 certain transactions. Refer to Note 10, Income Taxes, for additional information.

Shake Shack Inc.

Form 10-Q | 26

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processing of a limited amount of sales at certain of our locations, sales for certain off-site events and in connection with our kiosk technology. NaN amounts were due to Square as of June 24, 2020 and December 25, 2019, respectively.


		Thirteen Weeks Ended				Twenty-Six Weeks Ended
	Classification	June 30 2021		June 24 2020		June 30 2021		June 24 2020
Amounts paid to members (inclusive of interest)	Other current liabilities	$	0	$	74	$	0	$	6,643

Thirteen Weeks Ended Twenty-Six Weeks Ended
Classification June 24
2020 June 26
2019 June 24
2020 June 26
2019
Amounts paid to Square Other operating expenses $ 218 $ 442 $ 789 $ 708

~~Tax Receivable Agreement~~

As described in Note 12, we entered into a tax receivable agreement with certain members of SSE Holdings that provides for the payment by us of 85% of the amount of tax benefits, if any, that Shake Shack actually realizes or in some cases is deemed to realize as a result of certain transactions.

Thirteen Weeks Ended Twenty-Six Weeks Ended
Classification June 24
2020 June 26
2019 June 24
2020 June 26
2019
Amounts paid to members (inclusive of interest) Other current liabilities $ 74 $ — $ 6,643 $ 707

Classification June 24
2020 December 25
2019
Amounts due under the Tax Receivable Agreement Other current liabilities
Liabilities under tax receivable agreement, net of current portion $ 228,096 $ 234,426


	Classification	June 30 2021		December 30 2020
Amounts due under the Tax Receivable Agreement	Other current liabilities Liabilities under tax receivable agreement, net of current portion	$	234,049	$	232,954

Distributions to Members of SSE Holdings

Under the terms of the SSE Holdings LLC Agreement, SSE Holdings is obligated to make tax distributions to its members. NaN tax distributions were payable to non-controlling interest holders as of June ~~24, 2020~~30, 2021 and December ~~25, 2019,~~30, 2020, respectively.

Thirteen Weeks Ended Twenty-Six Weeks Ended
Classification June 24
2020 June 26
2019 June 24
2020 June 26
2019
Amounts paid to non-controlling interest holders Net income attributable to non-controlling interests $ 9 $ 1,558 $ 314 $ 1,667


		Thirteen Weeks Ended				Twenty-Six Weeks Ended
	Classification	June 30 2021		June 24 2020		June 30 2021		June 24 2020
Amounts paid to non-controlling interest holders	Non-controlling interests	$	239	$	9	$	706	$	314

~~Shake Shack Inc.~~ ~~Form 10-Q~~ | 27

~~Table of Contents~~

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

This section and other parts of this Quarterly Report on Form 10-Q ("Form 10-Q") contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"), which are subject to known and unknown risks, uncertainties and other important factors that may cause actual results to be materially ~~different.~~different from the statements made herein. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements ~~provide~~discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives, future ~~events based on certain assumptions~~performance and ~~include any statement~~business. You can identify forward-looking statements by the fact that ~~does~~they do not ~~directly~~ relate strictly to any historical or current fact, such as our expected financial outlook for fiscal 2020, our expected operating performance for fiscal 2020, expected Shack construction and openings, expected same-Shack sales growth and trends in our business, includingfacts. These statements ~~relating to the effects of COVID-19 and our mitigation efforts. Forward-looking statements can also be identified by~~may include words such as "aim," "anticipate," "believe," "estimate," "expect," "forecast," "future," "intend," "outlook," ~~"plan,"~~ "potential," ~~"predict,~~"project," ~~"project,~~"projection," "plan," "seek," "may," ~~"can,~~"could," "would," "will," ~~"would,~~"should," ~~"could,~~"can," ~~"should,~~"can have," "likely," the negatives thereof and other similar expressions. ~~Forward-looking statements are not guarantees of future performance and actual results may differ significantly from the results discussed in the forward-looking statements.~~ All forward-looking statements are expressly qualified in their entirety by these cautionary statements. ~~Factors that might cause such differences include, but are not limited to, those discussed~~You should evaluate all forward-looking statements made in ~~Part I, Item 1A~~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 ~~25, 2019~~30, 2020 ("~~2019~~2020 Form 10-K") ~~and Part II, Item 1A~~. The forward-looking statements included in this Form 10-Q are made only as of ~~this Quarterly Report on Form 10-Q.~~ the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

The following discussion should be read in conjunction with our ~~2019~~2020 Form 10-K and the condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Form 10-Q. All information presented herein is based on our fiscal calendar. 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. ~~We undertake no obligation to revise or update any forward-looking statements for any reason, except as required by law.~~

OVERVIEW

Shake Shack is a modern day "roadside" burger stand serving a classic American menu of premium burgers, chicken sandwiches, hot dogs, ~~crinkle cut~~crinkle-cut fries, shakes, frozen custard, beer and wine. As of June ~~24, 2020,~~30, 2021, there were ~~292~~339 Shacks in operation system-wide, of which ~~171~~200 were domestic ~~company-operated~~Company-operated Shacks, 2223 were domestic licensed Shacks and 99116 were international licensed Shacks.

~~COVID-19 Update~~

Shake Shack Inc.

Form 10-Q | 27

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Recent Developments and Trends

We ~~have~~ experienced ~~gradual improvement~~continued positive momentum in the business during the second quarter of ~~2020,~~2021, while continuing to support our Shack teams, our guests and ~~third quarter to date. The speed~~the communities in which we operate, as we navigate the COVID-19 pandemic. We remain focused on the recovery of both sales and profitability across our Shack base and growth over the long term. Our strategic plan centers on the evolution of our ~~recovery has differed depending on~~Shack formats through physical and digital transformation with the ~~location~~objective of delivering a seamless, elevated guest experience.

Same-Shack sales grew 52.7% year-on-year in the second quarter of 2021, compared to up 5.7% in the first quarter of 2021. Sales improved across all regions, and was led by strength of in-Shack dining as well as healthy retention of our digital sales. Although suburban Shacks are performing closer to pre-pandemic levels than urban, we saw encouraging momentum across urban Shacks throughout the second quarter. We also reached a milestone in our urban recovery, with ~~those Shacks concentrated in urban areas, such as New York City, most impacted by~~ the ~~COVID-19 outbreak. Urban Shacks represent approximately half~~reopening of the Union Station, DC and Grand Central Station, NYC Shacks in late June and early July, respectively. In the ~~comparable base, yet accounted for approximately 60% of our~~Southeast region, notably Texas, same-Shack sales ~~prior~~are now above pre-pandemic levels; these markets continue to represent growth opportunities for the ~~COVID-19 outbreak.~~ business across a variety of formats.

Average weekly sales were $72,000 in the second quarter of 2021, marking the highest level since the pandemic started, and up from $64,000 in the first quarter of 2021. Average weekly sales grew each month of the second quarter of 2021 and were $74,000 in fiscal June.

During the second quarter of ~~2020, same-Shack~~2021, total digital sales, including orders placed on the Shake Shack app, website and third-party delivery platforms, represented 47% of Shack sales. Even as the mix shifted with the return of in-Shack dining, retention of digital sales was approximately 80% in ~~our urban Shacks were down 57% and suburban Shacks were down 38%~~fiscal June when compared to fiscal January when digital sales peaked, with the Company-owned app channel performing higher than our digital average. During the second quarter of 2021 our new purchasers in Company-owned app and web channels grew 16.7% versus the first quarter of 2021, to 2.8 million total new purchasers since mid-March of 2020; continued investment across these channels is helping bring in new guests, even as in-Shack dining returns. We look forward to continuing to build on this strong foundation by offering our guests new and innovative ways to elevate their dining experience.

Licensing revenue for the second quarter of 2021 was $6.0 million, reflecting an increase of 164.2% versus the same period last year. ~~Subsequent to~~Improvement was driven domestically by the ~~second quarter~~return of ~~2020, in fiscal July 2020, same-Shack sales for our urban Shacks were down 50%~~air travel across airports and ~~suburban Shacks were down 24% compared to~~gradual lifting of capacity restrictions at major US stadiums; internationally, improvement was seen across the ~~same period last year. As of July 22, approximately 95% of domestic company-operated Shacks were open.~~regions where COVID-related restrictions have been eased.

As in-Shack ordering has increased over recent weeks, digital sales mix has continued to shift. During the second quarter total digital sales represented 75% of total Shack sales and more than doubled compared to the first quarter of 2020. Our native web and app channels more than tripled compared to the same period last year, and when combined, continued to be the fastest growing channels throughout Q2 and into July. For fiscal July, digital sales represented 62% of total Shack sales, retaining over 90% of the digital sales that were achieved during fiscal May even as in-Shack sales have gradually returned. In addition, we have welcomed over 800,000 first time purchasers via our own digital channels since early March, which is nearly four times higher than in the same period last year. We expect digital channels to remain a significant component of sales and ongoing growth.

28 | Shake Shack Inc.

Form 10-Q

Table of Contents

~~The following table presents fiscal monthly information about our current trends in Shack sales.~~

First Quarter Second Quarter Third Quarter
(dollar amounts in thousands) March 25 April 22 May 20 June 24 July 22
Average weekly sales* $ 56 $ 32 $ 50 $ 52 $ 56
Total year-over-year sales growth (decline) (11) % (56) % (32) % (32) % (23) %
Same-Shack sales % (29) % (64) % (42) % (42) % (39) %

*Average weekly sales is calculated by dividing total Shack sales by the number of operating weeks for all Shacks in operation during the period. For Shacks that are not open for the entire period, fractional adjustments are made to the number of operating weeks open such that it corresponds to the period of associated sales.

Our licensed business has shown gradual improvement across all regions as approximately 80% of licensed Shacks have reopened. All Shacks in Hong Kong, mainland China, Japan and Korea (with the exception of the Incheon Airport Shack) are now open although in most cases with limited hours and smaller capacity dining rooms. In the Middle East, the majority of Shacks have re-opened primarily for take-out and delivery with dining rooms slowly starting to open across the region. Approximately half the Shacks in the United Kingdom are fully reopened. Nearly all domestic stadium and event venues remain closed. Half of all airport locations are open but operating at severely reduced sales levels while air travel remains at a fraction of its volume prior to the COVID-19 outbreak. As an example of the dynamic and quickly evolving environment, the Shack located in Terminal 3 of the LAX airport will not reopen, as the airport has chosen to take this time to tear down and replace the terminal entirely.

~~The following table presents fiscal monthly information about our licensed sales trends.~~

First Quarter Second Quarter Third Quarter
(dollar amounts in millions) March 25 April 22 May 20 June 24 July 22
Weekly licensed sales⁽¹⁾
$ 4.6 $ 2.0 $ 2.4 $ 3.5 $ 4.6
Total year-over-year licensed sales growth (decline) 13 % (65) % (58) % (47) % (32) %
Number of open licensed Shacks 96 56 59 91 98

* Weekly licensed sales is an operating measure and consists of sales from domestic licensed Shacks and international licensed Shacks. We do 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.

Development Highlights

During the second quarter ~~ended June 24, 2020,~~of 2021, we opened ~~four~~eight new domestic Company-operated Shacks, ~~with~~one new ~~locations~~domestic licensed Shack and nine new international licensed Shacks. There were no permanent Shack closures in Topanga, Sacramento, Charlotte and St. Louis. With gradual sales recovery, primarily across most markets outside of New York City, we have restarted new Shack development. We expect to open between 6 and 11 additional domestic company-operated Shacks, back weighted towards the end of this year, for a total of 15 to 20 for the full year. However, given the ongoing uncertainties around construction, local government restrictions, and the broader operating environment during COVID-19, this number may be subject to change as target dates potentially shift.

~~During~~ the second quarter ~~ended~~of 2021.

Location

Type

Opening Date

Bronx, NY — Bay Plaza

Domestic Company-operated

4/1/2021

Seoul, South Korea — Nowon

International Licensed

4/2/2021

Los Angeles, CA — Dodger Stadium

Domestic Licensed

4/9/2021

Mexico City, Mexico — Roma Cibeles

International Licensed

4/14/2021

Beaverton, OR — Cedar Hills

Domestic Company-operated

4/16/2021

Macao, China — The Londoner

International Licensed

4/17/2021

Santa Monica, CA — Santa Monica

Domestic Company-operated

4/18/2021

Los Angeles, CA — Bunker Hill

Domestic Company-operated

4/19/2021

Fishers, IN — Fishers

Domestic Company-operated

4/22/2021

Beijing, China — China World

International Licensed

4/26/2021

Singapore, Singapore — Great World

International Licensed

4/28/2021

Shenzhen, China — MixC

International Licensed

5/20/2021

Kuwait City, Kuwait — 360 Mall

International Licensed

6/1/2021

Istanbul, Turkey — Istanbul Airport

International Licensed

6/4/2021

Tampa, FL — Midtown Tampa

Domestic Company-operated

6/7/2021

Seoul, South Korea — Coex Mall

International Licensed

6/9/2021

San Francisco, CA — San Francisco Centre

Domestic Company-operated

6/28/2021

Franklin, TN — Franklin

Domestic Company-operated

6/28/2021

Financial Highlights for the Second Quarter 2021

▪Total revenue in the second quarter of 2021 increased 104.2% to $187.5 million versus the same period last year.

▪Shack sales in the second quarter of 2021 increased 102.7% to $181.5 million versus the same period last year.

▪Same-Shack sales(1) improved to up 52.7% in the second quarter of 2021 versus the same period last year.

▪Licensed revenue in the second quarter of 2021 increased 164.2% to $6.0 million versus the same period last year.

▪Shack system-wide sales in the second quarter of 2021 increased 127.7% to $281.9 million, versus the same period last year.

▪Operating income in the second quarter of 2021 was $3.3 million compared to an operating loss of $24.1 million in the same period last year.

▪Shack-level operating profit(2) increased 1,699.7% in the second quarter of 2021 versus the same period last year, to $34.8 million, or 19.2% of Shack sales.

▪Net income was $2.1 million and adjusted EBITDA2 was $20.6 million in the second quarter of 2021, compared to a net loss of $18.0 million and adjusted EBITDA of $(8.8) million in the same period last year.

▪Net income attributable to Shake Shack Inc. was $1.9 million and adjusted pro forma net income2 was $2.4 million, or $0.05 per fully exchanged and diluted share in the second quarter of 2021, compared to net loss attributable to Shake Shack Inc. of $16.2 million and adjusted pro forma net loss of $18.3 million, or $(0.45) per fully exchanged and diluted share, in the same period last year.

▪Net system-wide Shack openings, comprised of eight net domestic Company-operated Shacks and ten net licensed Shacks.

▪Cash and cash equivalents and marketable securities on hand was $420.2 million as of June 24, 2020, we opened one new international licensed Shack in China at the Shanghai Hongqiao International Airport. In fiscal June, we expanded our partnership with licensee Maxim’s Caterers Limited which targets a development agreement of 15 Shacks in South China by 2030, including locations in Shenzhen, Guangzhou and more. Through this expanded partnership, this agreement increases development targets for mainland China to 55 Shacks by 2030, of which five Shacks are open today.30, 2021.

Shake Shack Inc.

Form 10-Q | 29

Table of Contents

~~Financial Highlights~~(1)In order to compare like-for-like periods for fiscal 2021, same-Shack sales will compare the ~~Second Quarter~~52 weeks from December 31, 2020 ~~compared~~through December 29, 2021 to the ~~Second Quarter 2019:~~ 52 weeks from January 2, 2020 through December 30, 2020. For Q2 2021, same-Shack sales compares the thirteen weeks from April 1, 2021 through June 30, 2021 to the thirteen weeks from April 2, 2020 through July 1, 2020.

▪(2)~~Total revenue decreased 39.9% to $91.8 million.~~

▪~~Shack sales decreased 39.5% to $89.5 million.~~

▪~~Same-Shack sales decreased 49.0%.~~

▪~~Licensed revenue decreased 53.1% to $2.3 million.~~

▪~~Shack system-wide sales decreased 45.2% to $123.8 million.~~

▪~~Operating loss of $24.1 million compared to operating income of $11.9 million in the prior year second quarter.~~

▪~~Shack-level operating profit*,~~This represents a non-GAAP ~~measure, decreased 94.7%~~measure. Reconciliations to ~~$1.9 million, or 2.2% of Shack sales.~~

▪Net loss was $18.0 million and adjusted EBITDA*, a non-GAAP measure, was a loss of $8.8 million, compared to net income of $11.2 million and adjusted EBITDA of $25.9 million in the prior year second quarter.

▪Net loss attributable to Shake Shack Inc. was $16.2 million and adjusted pro forma net loss*, a non-GAAP measure, was $18.3 million, or a loss of $0.45 per fully exchanged and diluted share, compared to net income attributable to Shake Shack Inc. of $9.0 million, adjusted pro forma net income of $10.2 million, or $0.27 per fully exchanged and diluted share, in the prior year second quarter.

▪~~Five system-wide Shack openings, comprised of four domestic company-operated Shacks and one licensed Shack.~~

▪~~As of June 24, 2020, we had $190.8 million in cash and marketable securities on hand.~~

* Shack-level operating profit, adjusted EBITDA and adjusted pro forma net income (loss) are non-GAAP measures. Reconciliations of Shack-level operating profit to operating income (loss) and adjusted EBITDA to net income (loss), the most directly comparable financial measures presented in accordance with GAAP are set forth in the schedules within “Non-GAAP Financial Measures,” herein.

~~FISCAL 2020 OUTLOOK~~

~~Given the substantial uncertainty and subsequent material economic impact caused by the COVID-19 pandemic, we have withdrawn our guidance for the fiscal year ending December 30, 2020.~~

30 | Shake Shack Inc.

Form 10-Q

~~Table of Contents~~

RESULTS OF OPERATIONS

The following table summarizes our results of operations for the thirteen and twenty-six weeks ended June ~~24, 2020~~30, 2021 and June ~~26, 2019:~~24, 2020:


			Thirteen Weeks Ended																			Twenty-Six Weeks Ended																										Thirteen Weeks Ended												Twenty-Six Weeks Ended
(dollar amounts in thousands)	(dollar amounts in thousands)				June 24 2020											June 26 2019										June 24 2020										June 26 2019								(dollar amounts in thousands)							June 30 2021							June 24 2020			June 30 2021	June 24 2020
Shack sales	Shack sales				$	89,519		97.5	%		$	147,876		96.8	%		$	227,567		96.9	%		$	276,445		96.9	%	Shack sales				$	181,470		96.8		%			$	89,519		97.5		%			$	332,138		96.9	%			$	227,567		96.9	%
Licensing revenue	Licensing revenue				2,267			2.5	%		4,837			3.2	%		7,389			3.1	%		8,877			3.1	%	Licensing revenue				5,990			3.2		%			2,267			2.5		%			10,604			3.1	%			7,389			3.1	%
TOTAL REVENUE	TOTAL REVENUE				91,786			100.0	%		152,713			100.0	%		234,956			100.0	%		285,322			100.0	%	TOTAL REVENUE				187,460			100.0		%			91,786			100.0		%			342,742			100.0	%			234,956			100.0	%
Shack-level operating expenses⁽¹⁾:	Shack-level operating expenses⁽¹⁾:																											Shack-level operating expenses(1):
		Food and paper costs		30,027	33.5		%			42,899	29.0		%			69,591	30.6		%			80,890	29.3		%		Food and paper costs			54,917		30.3		%				30,027		33.5		%				99,547		30.0		%			69,591		30.6		%
		Labor and related expenses		30,933	34.6		%			40,197	27.2		%			72,699	31.9		%			77,290	28.0		%		Labor and related expenses			52,631		29.0		%				30,933		34.6		%				99,013		29.8		%			72,699		31.9		%
		Other operating expenses		14,304	16.0		%			16,755	11.3		%			32,083	14.1		%			32,323	11.7		%		Other operating expenses			24,275		13.4		%				14,304		16.0		%				47,419		14.3		%			32,083		14.1		%
		Occupancy and related expenses		12,323	13.8		%			11,873	8.0		%			24,881	10.9		%			22,772	8.2		%		Occupancy and related expenses			14,876		8.2		%				12,323		13.8		%				28,787		8.7		%			24,881		10.9		%
General and administrative expenses	General and administrative expenses				14,017			15.3	%		15,393			10.1	%		30,208			12.9	%		29,330			10.3	%	General and administrative expenses				20,366			10.9		%			14,017			15.3		%			39,931			11.7	%			30,208			12.9	%
Depreciation expense					12,089			13.2	%		9,799			6.4	%		23,857			10.2	%		18,765			6.6	%
Depreciation and amortization expense																							Depreciation and amortization expense						14,472	7.7	%				12,089			13.2	%				28,198			8.2	%				23,857		10.2	%
Pre-opening costs	Pre-opening costs				1,734			1.9	%		3,549			2.3	%		3,977			1.7	%		6,191			2.2	%	Pre-opening costs				2,258			1.2		%			1,734			1.9		%			5,834			1.7	%			3,977			1.7	%
Impairment and loss on disposal of assets	Impairment and loss on disposal of assets				434			0.5	%		377			0.2	%		2,522			1.1	%		728			0.3	%	Impairment and loss on disposal of assets				358			0.2		%			434			0.5		%			727			0.2	%			2,522			1.1	%
TOTAL EXPENSES	TOTAL EXPENSES				115,861			126.2	%		140,842			92.2	%		259,818			110.6	%		268,289			94.0	%	TOTAL EXPENSES				184,153			98.2		%			115,861			126.2		%			349,456			102.0	%			259,818			110.6	%
OPERATING INCOME (LOSS)	OPERATING INCOME (LOSS)				(24,075)			(26.2)	%		11,871			7.8	%		(24,862)			(10.6)	%		17,033			6.0	%	OPERATING INCOME (LOSS)				3,307			1.8		%			(24,075)			(26.2)		%			(6,714)			(2.0)	%			(24,862)			(10.6)	%
Other income, net	Other income, net				394			0.4	%		447			0.3	%		301			0.1	%		1,011			0.4	%	Other income, net				108			0.1		%			394			0.4		%			139			—	%			301			0.1	%
Interest expense	Interest expense				(442)			(0.5)	%		(97)			(0.1)	%		(554)			(0.2)	%		(169)			(0.1)	%	Interest expense				(359)			(0.2)		%			(442)			(0.5)		%			(874)			(0.3)	%			(554)			(0.2)	%
INCOME (LOSS) BEFORE INCOME TAXES	INCOME (LOSS) BEFORE INCOME TAXES				(24,123)			(26.3)	%		12,221			8.0	%		(25,115)			(10.7)	%		17,875			6.3	%	INCOME (LOSS) BEFORE INCOME TAXES				3,056			1.6		%			(24,123)			(26.3)		%			(7,449)			(2.2)	%			(25,115)			(10.7)	%
Income tax expense (benefit)	Income tax expense (benefit)				(6,092)			(6.6)	%		1,050			0.7	%		(6,005)			(2.6)	%		3,097			1.1	%	Income tax expense (benefit)				991			0.5		%			(6,092)			(6.6)		%			(10,089)			(2.9)	%			(6,005)			(2.6)	%
NET INCOME (LOSS)	NET INCOME (LOSS)				(18,031)			(19.6)	%		11,171			7.3	%		(19,110)			(8.1)	%		14,778			5.2	%	NET INCOME (LOSS)				2,065			1.1		%			(18,031)			(19.6)		%			2,640			0.8	%			(19,110)			(8.1)	%
Less: net income (loss) attributable to non-controlling interests					(1,820)			(2.0)	%		2,141			1.4	%		(1,939)			(0.8)	%		3,202			1.1	%
Less: Net income (loss) attributable to non-controlling interests																							Less: Net income (loss) attributable to non-controlling interests						121	0.1	%				(1,820)			(2.0)	%				(613)			(0.2)	%				(1,939)		(0.8)	%
NET INCOME (LOSS) ATTRIBUTABLE TO SHAKE SHACK INC.	NET INCOME (LOSS) ATTRIBUTABLE TO SHAKE SHACK INC.				$	(16,211)		(17.7)	%		$	9,030		5.9	%		$	(17,171)		(7.3)	%		$	11,576		4.1	%	NET INCOME (LOSS) ATTRIBUTABLE TO SHAKE SHACK INC.				$	1,944		1.0		%			$	(16,211)		(17.7)		%			$	3,253		0.9	%			$	(17,171)		(7.3)	%

(1)As a percentage of Shack sales.

Shack Sales

Shack sales represent the aggregate sales of food, beverages and Shake Shack branded merchandise at our domestic ~~company-operated~~Company-operated Shacks. Shack sales in any period are directly influenced by the number of operating weeks in such period, the number of open Shacks and same-Shack sales. Same-Shack sales means, for any reporting period, sales for the comparable Shack base, which we define as the number of domestic ~~company-operated~~Company-operated Shacks open for 24 months or longer.


			Thirteen Weeks Ended													Twenty-Six Weeks Ended															Thirteen Weeks Ended									Twenty-Six Weeks Ended
(dollar amounts in thousands)	(dollar amounts in thousands)						June 24 2020				June 26 2019					June 24 2020				June 26 2019			(dollar amounts in thousands)				June 30 2021				June 24 2020					June 30 2021				June 24 2020
Shack sales	Shack sales						$	89,519			$	147,876				$	227,567			$	276,445		Shack sales				$	181,470			$	89,519				$	332,138			$	227,567
		Percentage of total revenue		97.5		%			96.8	%			96.9		%			96.9	%			Percentage of total revenue		96.8		%			97.5	%			96.9		%			96.9	%
		Dollar change compared to prior year		$	(58,357)								$	(48,878)								Dollar change compared to prior year		$	91,951								$	104,571
		Percentage change compared to prior year		(39.5)		%							(17.7)		%							Percentage change compared to prior year		102.7		%							46.0		%

The ~~decrease~~increases in Shack sales for the thirteen and twenty-six weeks ended June ~~24, 2020 was~~30, 2021 were primarily due to ~~lost sales related to~~ the ~~impact~~continued momentum associated with the recovery from the COVID-19 pandemic, ~~Furthermore, Shack sales were negatively impacted by an estimated $3.2 million due~~in addition to ~~nationwide protests and resulting curfews causing temporary Shack closures and reduced operating hours during~~ the ~~two~~opening of 29 net new domestic

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~~week period from May 28th through June 10th. These decreases were partially offset by the opening of 31 new domestic company-operated~~Company-operated Shacks between June ~~26, 2019~~24, 2020 and June ~~24, 2020.~~

~~Same-Shack~~30, 2021. Digital sales ~~decreased 49.0% in~~for the ~~second quarter of 2020~~thirteen and ~~31.3% in the~~ twenty-six weeks ended June ~~24, 2020, driven by~~30, 2021 increased 27.4% and 89.3% respectively, compared to the ~~adverse impact of reduced traffic resulting from~~same period last year.

Same-Shack sales for the ~~COVID-19 pandemic,~~thirteen weeks ended June 30, 2021 increased 52.7% compared to the same period last year, with urban Shacks ~~located in typically dense urban locations acutely impacted by the outbreak.~~increasing 53.8% and suburban Shacks increasing 51.8%. The ~~decrease~~increase in same-Shack sales for the second quarter 2021 was driven by a ~~60.1% decrease in traffic partially offset by an~~61.5% increase in ~~price mix~~guest traffic due to the return of 11.1%. This increase in price mix was driven by a 28% increase to total average check as a result of the significant shift into digital channels over the last few months, which have historically carried a higher average check than in-Shack. The decrease in same-Shackin-Shack dining. Same-Shack sales for the twenty-six weeks ended June ~~24, 2020 was~~30, 2021 increased 26.4% compared to the same period last year, primarily driven by ~~38.0% decrease~~a 16.1% increase in guest traffic ~~partially offset by~~and an increase in price mix of ~~6.7%~~10.3%. In the second quarter of 2020, same-Shack sales improved from a 64% decline in fiscal April 2020, to a 42% decline in each of fiscal May and June 2020. As noted herein, fiscal June Shack sales were negatively impacted by nationwide protest activity and resulting curfews. After adjusting for the impact of the protests, same-Shack sales showed sequential improvement, with a 39% decline in fiscal June 2020.

For the purpose of calculating same-Shack sales growth for the thirteen weeks ended June 30, 2021, Shack sales for 95130 Shacks were included in the comparable Shack ~~base.~~

~~Average weekly~~base, and for the twenty-six weeks ended June 30, 2021, Shack sales for ~~domestic company-operated~~132 Shacks ~~decreased to $45,000 for~~were included in the second quarter of 2020 compared to $85,000 for the same quarter last year, due to the impact of COVID-19. Average weekly sales have, however, experienced steady increases from $32,000 in fiscal April 2020, to $52,000 in fiscal June 2020 and $56,000 for fiscal July, representing an increase of 2.3 times the low point of the COVID-19 outbreak.comparable Shack base.

Licensing Revenue

Licensing revenue is comprised of license fees, opening fees for certain licensed Shacks and territory fees. License fees are calculated as a percentage of sales and territory fees are payments for the exclusive right to develop Shacks in a specific geographic area.


			Thirteen Weeks Ended													Twenty-Six Weeks Ended															Thirteen Weeks Ended									Twenty-Six Weeks Ended
(dollar amounts in thousands)	(dollar amounts in thousands)						June 24 2020				June 26 2019					June 24 2020				June 26 2019			(dollar amounts in thousands)				June 30 2021				June 24 2020					June 30 2021				June 24 2020
Licensing revenue	Licensing revenue						$	2,267			$	4,837				$	7,389			$	8,877		Licensing revenue				$	5,990			$	2,267				$	10,604			$	7,389
		Percentage of total revenue		2.5		%			3.2	%			3.1		%			3.1	%			Percentage of total revenue		3.2		%			2.5	%			3.1		%			3.1	%
		Dollar change compared to prior year		$	(2,570)								$	(1,488)								Dollar change compared to prior year		$	3,723								$	3,215
		Percentage change compared to prior year		(53.1)		%							(16.8)		%							Percentage change compared to prior year		164.2		%							43.5		%

The ~~decreases~~increases in ~~licensing~~Licensing revenue for the thirteen and twenty-six weeks ended June ~~24, 2020~~30, 2021 were primarily due to ~~lost sales related to the COVID-19 pandemic, partially offset by~~ a net increase of 2418 Shacks that opened between June ~~26, 2019~~24, 2020 and June ~~24, 2020. Licensing revenue showed gradual~~30, 2021 as well as increased strength across regions where COVID related restrictions have been eased. Our licensed business continues to show improvement ~~with a 65% decline in fiscal April 2020, a 47% decline in fiscal June 2020, and a 32% decline in fiscal July 2020.~~despite challenges that still remain due to the COVID-19 pandemic. As of the end of the second quarter 2021, eight licensed Shacks were temporarily closed due to the COVID-19 pandemic.

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, changing with sales volume, and are impacted by menu mix and fluctuations in commodity costs, as well as geographic scale and proximity.


			Thirteen Weeks Ended													Twenty-Six Weeks Ended															Thirteen Weeks Ended									Twenty-Six Weeks Ended
(dollar amounts in thousands)	(dollar amounts in thousands)						June 24 2020				June 26 2019					June 24 2020				June 26 2019			(dollar amounts in thousands)				June 30 2021				June 24 2020					June 30 2021				June 24 2020
Food and paper costs	Food and paper costs						$	30,027			$	42,899				$	69,591			$	80,890		Food and paper costs				$	54,917			$	30,027				$	99,547			$	69,591
		Percentage of Shack sales		33.5		%			29.0	%			30.6		%			29.3	%			Percentage of Shack sales		30.3		%			33.5	%			30.0		%			30.6	%
		Dollar change compared to prior year		$	(12,872)								$	(11,299)								Dollar change compared to prior year		$	24,890								$	29,956
		Percentage change compared to prior year		(30.0)		%							(14.0)		%							Percentage change compared to prior year		82.9		%							43.0		%

The ~~decreases~~increases in ~~food~~Food and paper costs for the ~~second quarter of~~thirteen and twenty-six weeks ended June ~~24, 2020~~30, 2021 were primarily due to ~~a decline in~~increased sales volume ~~related to~~associated with continued recovery from the COVID-19 pandemic ~~partially offset by~~and the opening of 3129 net new domestic ~~company-operated~~Company-operated Shacks between June ~~26, 2019~~24, 2020 and June ~~24, 2020.~~30, 2021.

As a percentage of Shack sales, the decreases in Food and paper costs for the thirteen and twenty-six weeks ended June 30, 2021 were primarily due to lower beef prices and paper and packaging prices, compared to the same period last year.

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As a percentage of Shack sales, the increase in food and paper costs for the thirteen and twenty-six weeks ended June 24, 2020 was primarily due to sales deleverage resulting from the impact of COVID-19, significant inflation in beef prices, increased paper and packaging costs, a number of incremental payroll costs and higher delivery commissions. For the large part of the second quarter of 2020, we experienced significant inflation in beef, with cost nearly double that of last year for most of June. Beef prices have since returned to more normalized levels, however this increase negatively impacted Food and Paper costs by approximately $2.5 million. Furthermore, the Company had significantly higher paper and packaging costs, with all orders packaged in sealed bags, impacting Food and Paper costs by approximately $1.4 million. For the twenty-six weeks ended June 24, 2020, as a percentage of Shack sales, the increase in food and paper costs were due to sales deleverage resulting from the COVID-19 pandemic, lower chicken costs primarily from lapping the promotional launch of Chick'n Bites, which carried higher costs, and was partially offset by significant inflation in beef prices, higher paper and packaging costs and a non-recurring inventory adjustment, as described in the "Non-GAAP Financial Measures" section, herein.

Labor and Related Expenses

Labor and related expenses include domestic ~~company-operated~~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, ~~we expect~~ labor costs toshould 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~~Company-operated Shacks.


			Thirteen Weeks Ended													Twenty-Six Weeks Ended															Thirteen Weeks Ended									Twenty-Six Weeks Ended
(dollar amounts in thousands)	(dollar amounts in thousands)						June 24 2020				June 26 2019					June 24 2020				June 26 2019			(dollar amounts in thousands)				June 30 2021				June 24 2020					June 30 2021				June 24 2020
Labor and related expenses	Labor and related expenses						$	30,933			$	40,197				$	72,699			$	77,290		Labor and related expenses				$	52,631			$	30,933				$	99,013			$	72,699
		Percentage of Shack sales		34.6		%			27.2	%			31.9		%			28.0	%			Percentage of Shack sales		29.0		%			34.6	%			29.8		%			31.9	%
		Dollar change compared to prior year		$	(9,264)								$	(4,591)								Dollar change compared to prior year		$	21,698								$	26,314
		Percentage change compared to prior year		(23.0)		%							(5.9)		%							Percentage change compared to prior year		70.1		%							36.2		%

The ~~decreases~~increases in ~~labor~~Labor and related expenses for the thirteen and twenty-six weeks ended June ~~24, 2020~~30, 2021 were primarily due to ~~significant reductions~~increases in ~~staffing expenses~~Shack team costs across all Shacks associated with the ~~impact of COVID-19. These decreases were partially offset by~~recovery from COVID-19, as well as the opening of 3129 net new domestic ~~company-operated~~Company-operated Shacks between ~~June 26, 2019 and~~ June 24, 2020 and incremental payroll costs of $2.4 million as a result of a temporary 10% premium pay raise to hourly employees, guaranteed bonuses for Shack managers, and payments related to scheduling changes for hourly team members as teams navigated the challenging operating conditions caused by COVID-19, during the second quarter of 2020.June 30, 2021.

As a percentage of Shack sales, the ~~increase~~decreases in ~~labor~~Labor and related expenses for the thirteen and twenty-six weeks ended June ~~24, 2020 was~~30, 2021 were primarily due to greater sales ~~deleverage~~leverage associated with the ~~impact of~~recovery from COVID-19, ~~and, to a lesser extent, increases in starting wages,~~ partially offset by ~~the reduction of labor hours.~~increased headcount.

Other Operating Expenses

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


			Thirteen Weeks Ended													Twenty-Six Weeks Ended															Thirteen Weeks Ended									Twenty-Six Weeks Ended
(dollar amounts in thousands)	(dollar amounts in thousands)						June 24 2020				June 26 2019					June 24 2020				June 26 2019			(dollar amounts in thousands)				June 30 2021				June 24 2020					June 30 2021				June 24 2020
Other operating expenses	Other operating expenses						$	14,304			$	16,755				$	32,083			$	32,323		Other operating expenses				$	24,275			$	14,304				$	47,419			$	32,083
		Percentage of Shack sales		16.0		%			11.3	%			14.1		%			11.7	%			Percentage of Shack sales		13.4		%			16.0	%			14.3		%			14.1	%
		Dollar change compared to prior year		$	(2,451)								$	(240)								Dollar change compared to prior year		$	9,971								$	15,336
		Percentage change compared to prior year		(14.6)		%							(0.7)		%							Percentage change compared to prior year		69.7		%							47.8		%

The ~~decreases~~increases in ~~other~~Other operating expenses for the thirteen and twenty-six weeks ended June ~~24, 2020~~30, 2021 were primarily due to higher delivery and transaction costs associated with the ~~reduction in expenses~~continued momentum of digital sales and an increase of in-Shack dining across all Shacks, ~~associated with the impact of COVID-19, partially offset by~~as well as the opening of 3129 net new domestic ~~company-operated~~Company-operated Shacks between ~~June 26, 2019 and~~ June 24, 2020 and ~~higher delivery expense~~June 30, 2021.

As a percentage of Shack sales, the decrease in Other operating expenses for the thirteen weeks ended June 30, 2021 was primarily due to sales leverage associated with ~~increased penetration of~~the recovery from COVID-19 as higher in-Shack sales growth outpaced delivery ~~sales during~~compared to the ~~quarter.~~

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same period last year. As a percentage of Shack sales, the increase in ~~other~~Other operating expenses for the ~~thirteen and~~ twenty-six weeks ended June ~~24, 2020~~30, 2021 was primarily ~~due~~related to higher delivery ~~commission associated with increased~~commissions as customers continue to take advantage of our multiple delivery ~~sales~~offerings compared to the prior year period as well as higher costs for gloves and ~~sales deleverage associated with the impact of COVID-19, as described herein.~~other disposables.

Occupancy and Related Expenses

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

Thirteen Weeks Ended Twenty-Six Weeks Ended
(dollar amounts in thousands) June 24
2020 June 26
2019 June 24
2020 June 26
2019
Occupancy and related expenses $ 12,323 $ 11,873 $ 24,881 $ 22,772
Percentage of Shack sales 13.8 % 8.0 % 10.9 % 8.2 %
Dollar change compared to prior year $ 450 $ 2,109
Percentage change compared to prior year 3.8 % 9.3 %

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~~This~~


		Thirteen Weeks Ended						Twenty-Six Weeks Ended
(dollar amounts in thousands)		June 30 2021			June 24 2020			June 30 2021			June 24 2020
Occupancy and related expenses		$	14,876		$	12,323		$	28,787		$	24,881
	Percentage of Shack sales	8.2		%	13.8		%	8.7		%	10.9		%
	Dollar change compared to prior year	$	2,553					$	3,906
	Percentage change compared to prior year	20.7		%				15.7		%

The increases in ~~occupancy~~Occupancy and related expenses for the thirteen and twenty-six weeks ended June ~~24, 2020~~30, 2021 were primarily due to the opening of 3129 net new domestic ~~company-operated~~Company-operated Shacks between June ~~26, 2019~~24, 2020 and June ~~24, 2020.~~30, 2021.

As a percentage of Shack sales, the ~~increase~~decreases in ~~occupancy~~Occupancy and related expenses for the thirteen and twenty-six weeks ended June ~~24, 2020 was~~30, 2021 were primarily due to sales ~~deleverage~~leverage associated with the ~~impact of COVID-19.~~continued recovery from the COVID-19 pandemic.

General and Administrative Expenses

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


			Thirteen Weeks Ended													Twenty-Six Weeks Ended															Thirteen Weeks Ended									Twenty-Six Weeks Ended
(dollar amounts in thousands)	(dollar amounts in thousands)						June 24 2020				June 26 2019					June 24 2020				June 26 2019			(dollar amounts in thousands)				June 30 2021				June 24 2020					June 30 2021				June 24 2020
General and administrative expenses	General and administrative expenses						$	14,017			$	15,393				$	30,208			$	29,330		General and administrative expenses				$	20,366			$	14,017				$	39,931			$	30,208
		Percentage of total revenue		15.3		%			10.1	%			12.9		%			10.3	%			Percentage of total revenue		10.9		%			15.3	%			11.7		%			12.9	%
		Dollar change compared to prior year		$	(1,376)								$	878								Dollar change compared to prior year		$	6,349								$	9,723
		Percentage change compared to prior year		(8.9)		%							3.0		%							Percentage change compared to prior year		45.3		%							32.2		%

The ~~decrease~~increases in ~~general~~General and administrative expenses for the thirteen and twenty-six weeks ended June ~~24, 2020~~30, 2021 were primarily due to ~~reduced staffing levels,~~an increase in wages and ~~cuts across the majority of discretionary spend categories, partially offset by increased technology expense~~other team costs to support ~~further digital enhancements,~~the continued recovery from the COVID-19 pandemic, as well as ~~higher professional fees of approximately $0.3 million related to the April equity offering and the implementation of the CARES Act, with additional costs expected~~an increase in ~~the third quarter of 2020.~~marketing expenses.

As a percentage of total revenue, the ~~increases~~decreases in ~~general~~General and administrative expenses for the thirteen and twenty-six weeks ended June ~~24, 2020~~30, 2021 were primarily due to sales ~~deleverage~~leverage associated with the ~~impact of COVID-19.~~continued recovery from the COVID-19 pandemic.

Depreciation and Amortization Expense

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

Thirteen Weeks Ended Twenty-Six Weeks Ended
(dollar amounts in thousands) June 24
2020 June 26
2019 June 24
2020 June 26
2019
Depreciation expense $ 12,089 $ 9,799 $ 23,857 $ 18,765
Percentage of total revenue 13.2 % 6.4 % 10.2 % 6.6 %
Dollar change compared to prior year $ 2,290 $ 5,092
Percentage change compared to prior year 23.4 % 27.1 %

~~34 |~~ ~~Shake Shack Inc.~~ ~~Form 10-Q~~

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		Thirteen Weeks Ended						Twenty-Six Weeks Ended
(dollar amounts in thousands)		June 30 2021			June 24 2020			June 30 2021			June 24 2020
Depreciation and amortization expense		$	14,472		$	12,089		$	28,198		$	23,857
	Percentage of total revenue	7.7		%	13.2		%	8.2		%	10.2		%
	Dollar change compared to prior year	$	2,383					$	4,341
	Percentage change compared to prior year	19.7		%				18.2		%

The increases in ~~depreciation~~Depreciation and amortization expense for the thirteen and twenty-six weeks ended June ~~24, 2020~~30, 2021 were ~~primarily~~predominantly due to incremental depreciation of capital expenditures related to the opening of 3129 net new domestic ~~company-operated~~Company-operated Shacks between June ~~26, 2019~~24, 2020 and June ~~24, 2020.~~30, 2021.

As a percentage of total revenue, the ~~increases~~decreases in ~~depreciation~~Depreciation and amortization expense for the thirteen and twenty-six weeks ended June ~~24, 2020~~30, 2021 were primarily due to sales ~~deleverage~~leverage associated with the ~~impact of COVID-19.~~recovery from the COVID-19 pandemic.

Pre-Opening Costs

Pre-opening costs consist primarily of legal fees, rent, managers' salaries, training costs, employee payroll and related expenses, costs to relocate and compensate Shack management teams prior to an opening and wages, travel and lodging costs for our

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opening training team and other supporting team members. All such costs incurred prior to the opening of a domestic ~~company-operated~~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~~Company-operated Shack openings and the specific pre-opening costs incurred for each domestic ~~company-operated~~Company-operated Shack. Additionally, domestic ~~company-operated~~Company-operated Shack openings in new geographic market areas may initially experience higher pre-opening costs than our established geographic market areas, such as the New York City metropolitan area, where we have greater economies of scale and incur lower travel and lodging costs for our training team.


			Thirteen Weeks Ended													Twenty-Six Weeks Ended															Thirteen Weeks Ended									Twenty-Six Weeks Ended
(dollar amounts in thousands)	(dollar amounts in thousands)						June 24 2020				June 26 2019					June 24 2020				June 26 2019			(dollar amounts in thousands)				June 30 2021				June 24 2020					June 30 2021				June 24 2020
Pre-opening costs	Pre-opening costs						$	1,734			$	3,549				$	3,977			$	6,191		Pre-opening costs				$	2,258			$	1,734				$	5,834			$	3,977
		Percentage of total revenue		1.9		%			2.3	%			1.7		%			2.2	%			Percentage of total revenue		1.2		%			1.9	%			1.7		%			1.7	%
		Dollar change compared to prior year		$	(1,815)								$	(2,214)								Dollar change compared to prior year		$	524								$	1,857
		Percentage change compared to prior year		(51.1)		%							(35.8)		%							Percentage change compared to prior year		30.2		%							46.7		%

The ~~decreases~~increases in ~~pre-opening~~Pre-opening costs for the thirteen and twenty-six weeks ended June ~~24, 2020~~30, 2021 were due to the ~~lower~~higher number of new domestic ~~company-operated~~Company-operated Shacks opened during the current period compared to the prior-year ~~period.~~period, as well as those expected to open.

Impairment and Loss on Disposal of ~~Property and Equipment~~Assets

Impairment and loss on disposal of assets include 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 and consists primarily of furniture, equipment and fixtures that were replaced in the normal course of business.


			Thirteen Weeks Ended													Twenty-Six Weeks Ended																	Thirteen Weeks Ended									Twenty-Six Weeks Ended
(dollar amounts in thousands)	(dollar amounts in thousands)						June 24 2020				June 26 2019					June 24 2020				June 26 2019			(dollar amounts in thousands)						June 30 2021				June 24 2020					June 30 2021				June 24 2020
Impairment and loss on disposal of property and equipment							$	434			$	377				$	2,522			$	728
Impairment and loss on disposal of assets																		Impairment and loss on disposal of assets						$	358				$	434			$	727				$	2,522
		Percentage of total revenue		0.5		%			0.2	%			1.1		%			0.3	%			Percentage of total revenue				0.2		%			0.5	%			0.2		%			1.1	%
		Dollar change compared to prior year		$	57								$	1,794								Dollar change compared to prior year				$	(76)								$	(1,795)
		Percentage change compared to prior year		15.1		%							246.4		%							Percentage change compared to prior year				(17.5)		%							(71.2)		%

The ~~increase~~decrease in ~~impairment~~Impairment and loss on disposal of ~~property and equipment~~assets for the thirteen ~~and twenty-six~~ weeks ended June ~~24, 2020~~30, 2021 was primarily due to the number of Shacks maturing in our ~~base and renovations.~~base. For the twenty-six weeks ended June ~~24, 2020,~~30, 2021, the ~~increase~~decrease was ~~also~~primarily due to an ~~asset~~ impairment charge of $1.1 million inrecorded during the ~~current period.~~first quarter of 2020.

Other Income, Net

Other income, net consists of interest income, dividend income and net unrealized and realized gains and losses from marketable securities.


		Thirteen Weeks Ended						Twenty-Six Weeks Ended
(dollar amounts in thousands)		June 30 2021			June 24 2020			June 30 2021			June 24 2020
Other income, net		$	108		$	394		$	139		$	301
	Percentage of total revenue	0.1		%	0.4		%	—		%	0.1		%
	Dollar change compared to prior year	$	(286)					$	(162)
	Percentage change compared to prior year	(72.6)		%				(53.8)		%

The decrease in Other income, net for the ~~sale of~~thirteen weeks ended June 30, 2021 was primarily due to a decrease in unrealized gains related to our investments in marketable securities partially offset by an increase in dividend income. The decrease in Other income, net for the twenty-six weeks ended June 30, 2021 was primarily due to a decrease in dividend income and an increase in unrealized losses related to our investments in marketable securities.

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Thirteen Weeks Ended Twenty-Six Weeks Ended
(dollar amounts in thousands) June 24
2020 June 26
2019 June 24
2020 June 26
2019
Other income, net $ 394 $ 447 $ 301 $ 1,011
Percentage of total revenue 0.4 % 0.3 % 0.1 % 0.4 %
Dollar change compared to prior year $ (53) $ (710)
Percentage change compared to prior year (11.9) % (70.2) %

The decrease in other income, net for the thirteen weeks ended June 24, 2020 was primarily due to a decrease in dividend income partially offset by unrealized gains related to our investments in marketable securities. For the twenty-six weeks ended June 24, 2020, the decrease was primarily due to a decrease in dividend income and unrealized losses related to our investments in marketable securities.

Interest Expense

Interest expense primarily 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, imputed interest on deferred compensation, imputed interest on our deemed landlord financing liability, and interest and fees on our Revolving Credit Facility.


			Thirteen Weeks Ended													Twenty-Six Weeks Ended															Thirteen Weeks Ended									Twenty-Six Weeks Ended
(dollar amounts in thousands)	(dollar amounts in thousands)						June 24 2020				June 26 2019					June 24 2020				June 26 2019			(dollar amounts in thousands)				June 30 2021				June 24 2020					June 30 2021				June 24 2020
Interest expense	Interest expense						$	(442)			$	(97)				$	(554)			$	(169)		Interest expense				$	(359)			$	(442)				$	(874)			$	(554)
		Percentage of total revenue		(0.5)		%			(0.1)	%			(0.2)		%			(0.1)	%			Percentage of total revenue		(0.2)		%			(0.5)	%			(0.3)		%			(0.2)	%
		Dollar change compared to prior year		$	(345)								$	(385)								Dollar change compared to prior year		$	83								$	(320)
		Percentage change compared to prior year		355.7		%							227.8		%							Percentage change compared to prior year		(18.8)		%							57.8		%

The ~~increases~~decrease in ~~interest~~Interest expense for the thirteen ~~and twenty-six~~ weeks ended June ~~24, 2020~~30, 2021 was primarily due to ~~an increase~~a decrease in interest charges and fees associated with our Revolving Credit Facility in the current ~~year.~~period.

The increase in Interest expense for the twenty-six weeks ended June 30, 2021 was primarily due to the write-off of previously capitalized costs of $0.3 million associated with the amendment of our Revolving Credit Facility in March 2021. Refer to Note 6, Debt, in the accompanying Condensed Consolidated Financial Statements, for additional information.

Income Tax Expense (Benefit)

We are the sole managing member of SSE Holdings ~~which~~and, as a result, consolidates the financial results of SSE Holdings. SSE Holdings is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, SSE Holdings is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by SSE Holdings is passed through to and included in the taxable income or loss of its members, including us, on a pro rata basis. We are subject to U.S. federal income taxes, in addition to state and local income taxes with respect to ~~our~~its allocable share of any taxable income or loss of SSE Holdings, as well as any stand-alone income or loss generated by ~~SSE Holdings.~~us. We are also subject to withholding taxes in foreign jurisdictions.


			Thirteen Weeks Ended													Twenty-Six Weeks Ended																	Thirteen Weeks Ended									Twenty-Six Weeks Ended
(dollar amounts in thousands)	(dollar amounts in thousands)						June 24 2020				June 26 2019					June 24 2020				June 26 2019			(dollar amounts in thousands)						June 30 2021				June 24 2020					June 30 2021				June 24 2020
Income tax expense							$	(6,092)			$	1,050				$	(6,005)			$	3,097
Income tax expense (benefit)																		Income tax expense (benefit)						$	991				$	(6,092)			$	(10,089)				$	(6,005)
		Percentage of total revenue		(6.6)		%			0.7	%			(2.6)		%			1.1	%			Percentage of total revenue				0.5		%			(6.6)	%			(2.9)		%			(2.6)	%
		Dollar change compared to prior year		$	(7,142)								$	(9,102)								Dollar change compared to prior year				$	7,083								$	(4,084)
		Percentage change compared to prior year		(680.2)		%							(293.9)		%							Percentage change compared to prior year				(116.3)		%							68.0		%

Our effective income tax rates for the thirteen weeks ended June 30, 2021 and June 24, 2020 were 32.4% and ~~June 26, 2019 were~~ 25.3% ~~and 8.6%~~, respectively. The increase was primarily driven by ~~lower~~higher pre-tax book income resulting in income and higher foreign withholding taxes, partially offset by a ~~loss, causing the tax credits to have an increasing effect on the tax rate, as well as the recognition~~reduction of a valuation ~~allowance against foreign tax credits that are not expected to be realized before the expiration of the carryforward period.~~allowance. Additionally, an increase in our ownership interest in SSE Holdings increases our share of the taxable income (loss) of SSE Holdings. Our weighted-average ownership interest in SSE Holdings was ~~92.3%~~93.0% and ~~81.0%~~92.3% for the thirteen weeks ended June ~~24, 2020~~30, 2021 and June ~~26, 2019,~~24, 2020, respectively.

Our effective income tax rates for the twenty-six weeks ended June 30, 2021 and June 24, 2020 were 135.4% and 23.9%, respectively. Our weighted-average ownership interest in SSE Holdings was 93.0% and 92.0% for the twenty-six weeks ended June 30, 2021 and June ~~26, 2019 were 23.9% and 17.3%,~~24, 2020, respectively. The increase was primarily driven by lower pre-tax book income resulting in a loss, causing the tax credits to have an increasing effect on the tax rate, as well as the recognition of a valuation allowance against foreign tax credits that are not

36 | Shake Shack Inc.

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expected to be realized before the expiration of the carryforward period. These were partially offset by a reduction in the tax effect of changes related to the adoption of new accounting standards, for which there were none during the twenty-six weeks ended June 24, 2020. Additionally, as noted above, an increase in our ownership interest in SSE Holdings increases our share of the taxable income (loss) of SSE Holdings. Our weighted-average ownership interest in SSE Holdings was 92.0% and 80.3% for the twenty-six weeks ended June 24, 2020 and June 26, 2019, respectively.

Net Income (Loss) Attributable to Non-Controlling Interests

We are the sole managing member of SSE Holdings and have the sole voting power in, and control the management of, SSE Holdings. Accordingly, we consolidate the financial results of SSE Holdings and report a non-controlling interest on our Condensed Consolidated Statements of Income (Loss), representing the portion of net income (loss) attributable to the other members of SSE Holdings. The Third Amended and Restated Limited Liability Company Agreement of SSE Holdings provides that holders of LLC Interests may, from time to time, require SSE Holdings to redeem all or a portion of their LLC Interests for newly-issued shares of Class A common stock on a one-for-one basis. In connection with any redemption or exchange, we will receive a corresponding number of LLC Interests, increasing our total ownership interest in SSE Holdings. The weighted average ownership percentages for the applicable reporting periods are used to attribute net income (loss) and other comprehensive income to Shake Shack Inc. and the non-controlling interest holders.


			Thirteen Weeks Ended													Twenty-Six Weeks Ended															Thirteen Weeks Ended									Twenty-Six Weeks Ended
(dollar amounts in thousands)	(dollar amounts in thousands)						June 24 2020				June 26 2019					June 24 2020				June 26 2019			(dollar amounts in thousands)				June 30 2021				June 24 2020					June 30 2021				June 24 2020
Net income (loss) attributable to non-controlling interests	Net income (loss) attributable to non-controlling interests						$	(1,820)			$	2,141				$	(1,939)			$	3,202		Net income (loss) attributable to non-controlling interests				$	121			$	(1,820)				$	(613)			$	(1,939)
		Percentage of total revenue		(2.0)		%			1.4	%			(0.8)		%			1.1	%			Percentage of total revenue		0.1		%			(2.0)	%			(0.2)		%			(0.8)	%
		Dollar change compared to prior year		$	(3,961)								$	(5,141)								Dollar change compared to prior year		$	1,941								$	1,326
		Percentage change compared to prior year		(185.0)		%							(160.6)		%							Percentage change compared to prior year		(106.6)		%							(68.4)		%

The ~~decreases~~increase in ~~net~~Net income (loss) attributable to non-controlling interests for the thirteen weeks ended June 30, 2021 was primarily due to an increase in net results causing a profit for the period, partially offset by a decrease in the non-controlling interest holders' weighted average ownership, which was 7.0% and 7.7% for the thirteen weeks ended June 30, 2021 and June 24, 2020, respectively.

The increase in Net income (loss) attributable to non-controlling interests for the twenty-six weeks ended June ~~24, 2020 were~~30, 2021 was primarily due to ~~a decline~~an increase in net results ~~causing a~~which moderated the loss for the period, and a decrease in the non-controlling interest holders' weighted average ownership, which was ~~7.7%~~7.0% and ~~19.0% for the thirteen weeks ended June 24, 2020 and June 26, 2019, respectively, and~~ 8.0% ~~and 19.7%~~ for the twenty-six weeks ended June ~~24, 2020~~30, 2021 and June ~~26, 2019,~~24, 2020, respectively.

NON-GAAP FINANCIAL MEASURES

To supplement the condensed consolidated financial statements, which are prepared and presented in accordance with ~~U.S.~~accounting principles generally accepted ~~accounting principles (“GAAP”~~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").

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Shack-Level Operating Profit

Shack-level operating profit is defined as Shack sales less Shack-level operating expenses including ~~food~~Food and paper costs, ~~labor~~Labor and related expenses, ~~other~~Other operating expenses and ~~occupancy~~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 our 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 employee compensation as it serves as a metric in certain ~~of our~~ performance-based employee 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~~the Shacks, as these measures depict the operating results that are directly impacted by ~~our~~the Shacks and exclude items that may not be indicative of, or are unrelated to, the ongoing operations of ~~our~~the Shacks. It may also assist investors to evaluate ~~our~~the Company's 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~~the 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~~General and administrative expenses and ~~pre-opening~~Pre-opening costs, which are considered normal, recurring cash operating expenses and are essential to support the operation and development of ~~our~~the Company's Shacks. Therefore, this measure may not provide a complete understanding of the Company's 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~~the Company's GAAP financial results. A reconciliation of Shack-level operating profit to ~~operating~~Operating income (loss), the most directly comparable GAAP financial measure, is ~~as follows.~~set forth below.


			Thirteen Weeks Ended												Twenty-Six Weeks Ended													Thirteen Weeks Ended								Twenty-Six Weeks Ended
(dollar amounts in thousands)	(dollar amounts in thousands)			June 24 2020				June 26 2019				June 24 2020				June 26 2019			(dollar amounts in thousands)		June 30 2021				June 24 2020				June 30 2021				June 24 2020
Operating income (loss)	Operating income (loss)			$	(24,075)			$	11,871			$	(24,862)			$	17,033		Operating income (loss)		$	3,307			$	(24,075)			$	(6,714)			$	(24,862)
Less:	Less:																		Less:
		Licensing revenue	2,267				4,837				7,389				8,877			Licensing revenue		5,990				2,267				10,604				7,389
Add:	Add:																		Add:
		General and administrative expenses	14,017				15,393				30,208				29,330			General and administrative expenses		20,366				14,017				39,931				30,208
		Depreciation expense	12,089				9,799				23,857				18,765			Depreciation and amortization expense		14,472				12,089				28,198				23,857
		Pre-opening costs	1,734				3,549				3,977				6,191			Pre-opening costs		2,258				1,734				5,834				3,977
		Loss on disposal of property and equipment	434				377				2,522				728			Impairment and loss on disposal of assets(1)		358				434				727				2,522
Shack-level operating profit	Shack-level operating profit			$	1,932			$	36,152			$	28,313			$	63,170		Shack-level operating profit		$	34,771			$	1,932			$	57,372			$	28,313

Total revenue	Total revenue			$	91,786			$	152,713			$	234,956			$	285,322		Total revenue		$	187,460			$	91,786			$	342,742			$	234,956
Less: licensing revenue				2,267				4,837				7,389				8,877
Less: Licensing revenue																Less: Licensing revenue				5,990				2,267				10,604				7,389
Shack sales	Shack sales			$	89,519			$	147,876			$	227,567			$	276,445		Shack sales		$	181,470			$	89,519			$	332,138			$	227,567

Shack-level operating profit margin(2)	Shack-level operating profit margin(2)			2.2		%		24.4		%		12.4		%		22.9		%	Shack-level operating profit margin(2)		19.2		%		2.2		%		17.3		%		12.4		%

(1)For the twenty-six weeks ended June 24, 2020, amount includes a non-cash impairment charge of $1.1 million related to one Shack.

(2)As a percentage of Shack sales.

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EBITDA and Adjusted EBITDA

EBITDA is defined as ~~net~~Net income (loss) before interest expense (net of interest income), ~~income~~Income tax expense (benefit) and ~~depreciation~~Depreciation and amortization expense. Adjusted EBITDA is defined as EBITDA (as defined above) excluding equity-based compensation expense, deferred lease ~~cost, losses~~costs, Impairment and loss on the disposal of ~~property and equipment,~~assets, amortization of cloud-based software implementation costs, as well as certain non-recurring items that we ~~don't~~do not believe directly reflect ~~our~~the core operations and may not be indicative of ~~our~~ recurring business operations.

How These Measures Are Useful

When used in conjunction with GAAP financial measures, EBITDA and adjusted EBITDA are supplemental measures of operating performance that we believe are useful measures to facilitate comparisons to historical performance and competitors' operating results. Adjusted EBITDA is a key metric used internally ~~by our management~~ to develop internal budgets and forecasts and also serves as a metric in our performance-based equity incentive programs and certain ~~of our~~ bonus arrangements. 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~~its ongoing business operations because they exclude items that may not be indicative of the our ongoing operating performance.

Limitations of the Usefulness of These Measures

EBITDA and adjusted EBITDA may differ from similarly titled measures used by other companies due to different methods of calculation. Presentation of EBITDA and adjusted EBITDA 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. EBITDA and adjusted EBITDA exclude certain normal recurring expenses. Therefore, these measures may not provide a complete understanding of our performance and should be reviewed in conjunction with ~~our~~the GAAP financial measures. A reconciliation of EBITDA and adjusted EBITDA to ~~net~~Net income (loss), the most directly comparable GAAP measure, is as follows.

Thirteen Weeks Ended Twenty-Six Weeks Ended
(in thousands) June 24
2020 June 26
2019 June 24
2020 June 26
2019
Net income (loss) $ (18,031) $ 11,171 $ (19,110) $ 14,778
Depreciation expense 12,089 9,799 23,857 18,765
Interest expense, net 442 97 554 169
Income tax expense (6,092) 1,050 (6,005) 3,097
EBITDA (11,592) 22,117 (704) 36,809
Equity-based compensation 1,419 2,235 2,719 3,955
Amortization of cloud-based software implementation costs⁽¹⁾
368 — 628 —
Deferred lease costs⁽²⁾
479 715 149 1,300
Impairment and loss on disposal of property and equipment⁽³⁾
434 377 2,522 728
Other income related to adjustment of liabilities under tax receivable agreement — — — (14)
Executive transition costs⁽⁴⁾
34 88 68 126
Project Concrete⁽⁵⁾
24 213 (237) 685
Hong Kong office⁽⁶⁾
— 171 — 171
Other⁽⁷⁾
— — 285 —
Adjusted EBITDA $ (8,834) $ 25,916 $ 5,430 $ 43,760
Adjusted EBITDA margin⁽⁸⁾
(9.6) % 17.0 % 2.3 % 15.3 %

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Form 10-Q | 39

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	Thirteen Weeks Ended						Twenty-Six Weeks Ended
(dollar amounts in thousands)	June 30 2021			June 24 2020			June 30 2021			June 24 2020
Net income (loss)	$	2,065		$	(18,031)		$	2,640		$	(19,110)
Depreciation and amortization expense	14,472			12,089			28,198			23,857
Interest expense, net	359			442			874			554
Income tax expense (benefit)	991			(6,092)			(10,089)			(6,005)
EBITDA	17,887			(11,592)			21,623			(704)

Equity-based compensation	1,958			1,419			3,639			2,719
Amortization of cloud-based software implementation costs(1)	314			368			627			628
Deferred lease costs(2)	(75)			479			129			149
Impairment and loss on disposal of assets(3)	358			434			727			2,522
Debt offering related costs(4)	—			—			236			—
Legal settlement(5)	24			—			619			—

Executive transition costs(6)	179			34			179			68
Project Concrete(7)	—			24			—			(237)


Other(8)	—			—			—			285


Adjusted EBITDA	$	20,645		$	(8,834)		$	27,779		$	5,430

Adjusted EBITDA margin(9)	11.0		%	(9.6)		%	8.1		%	2.3		%

(1)Represents amortization of capitalized implementation costs related to cloud-based software arrangements that are included within ~~general~~General and administrative expenses.

(2)Reflects the extent to which lease expense is greater than or less than contractual fixed base rent.

(3)Includes losses on disposals of property and equipment in the normal course of business. For the twenty-six weeks ended June 24, 2020, this amount includes a non-cash impairment charge of $1.1 million related to one Shack.

(4)Costs incurred in connection with the Company’s Convertible Notes, issued in March 2021, including consulting and advisory fees. Refer to Note 6, Debt, in the accompanying Condensed Consolidated Financial Statements, for additional information.

(5)Expense incurred to establish an accrual related to the settlement of a legal matter. Refer to Note 13, Commitments and Contingencies, in the accompanying Condensed Consolidated Financial Statements, for additional information.

(6)Represents fees paid in connection with the search and hiring of certain executive and key management positions.

~~(5)~~ (7)Represents consulting and advisory fees related to the ~~our~~Company's enterprise-wide system upgrade initiative called Project Concrete.

~~(6) Represents costs associated with establishing our first international office in Hong Kong.~~

~~(7)~~ (8)Represents incremental expenses incurred related to an inventory adjustment and certain employee-related expenses.

~~(8)~~ (9)Calculated as a percentage of total revenue, which was $187,460 and $342,742 for the thirteen and twenty-six weeks ended June 30, 2021, respectively, and $91,786 and $234,956 for the thirteen and twenty-six weeks ended June 24, 2020, ~~respectively, and $152,713 and $285,322 for the thirteen and twenty-six weeks ended June 26, 2019,~~ respectively.

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

Adjusted pro forma net income (loss) represents ~~net~~Net income (loss) attributable to Shake Shack Inc. assuming the full exchange of all outstanding SSE Holdings, LLC membership interests ("LLC Interests") for shares of Class A common stock, adjusted for certain non-recurring items that we do not believe are directly related to our core operations and may not be indicative of our recurring business operations. 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.

How These Measures Are Useful

When used in conjunction with GAAP financial measures, adjusted pro forma net income (loss) and adjusted pro forma earnings (loss) per fully exchanged and diluted share are supplemental measures of operating performance that we believe are useful measures to evaluate our performance period over period and relative to our competitors. 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~~Net income (loss) attributable to Shake Shack Inc. driven by increases in our ownership of SSE Holdings, which are unrelated to

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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

Adjusted pro forma net income (loss) and adjusted pro forma earnings (loss) per fully exchanged and diluted share may differ from similarly titled measures used by other companies due to different methods of calculation. 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~~Net income (loss) and earnings (loss) per share, as determined under GAAP. While these measures are useful in evaluating our performance, it does not account for the earnings attributable to the non-controlling interest holders and therefore does not provide a complete understanding of the ~~net~~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~~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.

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				Thirteen Weeks Ended											Twenty-Six Weeks Ended																	Thirteen Weeks Ended								Twenty-Six Weeks Ended
(in thousands, except per share amounts)	(in thousands, except per share amounts)						June 24 2020				June 26 2019				June 24 2020					June 26 2019			(in thousands, except per share amounts)					June 30 2021				June 24 2020				June 30 2021				June 24 2020
Numerator:	Numerator:																						Numerator:
																			Net income (loss) attributable to Shake Shack Inc.					$	1,944			$	(16,211)			$	3,253			$	(17,171)
																			Adjustments:
		Net income (loss) attributable to Shake Shack Inc.			$	(16,211)			$	9,030			$	(17,171)			$	11,576						Reallocation of Net income (loss) attributable to non-controlling interests from the assumed exchange of LLC Interests(1)		121				(1,820)				(613)				(1,939)
		Adjustments:																						Executive transition costs(2)		179				34				179				68
			Reallocation of net income attributable to non-controlling interests from the assumed exchange of LLC Interests⁽¹⁾	(1,820)			2,141				(1,939)				3,202							Project Concrete(3)		—				24				—				(237)
			Executive transition costs⁽²⁾	34			88				68				126
			Project Concrete⁽³⁾	24			213				(237)				685
																						Legal settlement(4)		24				—				619				—
			Hong Kong office⁽⁴⁾	—			171				—				171							Debt offering related costs(5)		—				—				236				—
																						Revolving Credit Facility amendments related costs(6)		—				—				323				—
			Other⁽⁵⁾	—			—				285				—

			Other income related to adjustment of liabilities under tax receivable agreement	—			—				—				(14)
			Tax effect of change in tax basis related to the adoption of new accounting standards⁽⁶⁾	—			—				—				1,161							Income tax (expense) benefit(7)		112				(286)				136				1,533
			Income tax expense⁽⁷⁾	(286)			(1,397)				1,533				(1,712)							Other(8)		—				—				—				285
		Adjusted pro forma net income (loss)			$	(18,259)			$	10,246			$	(17,461)			$	15,195				Adjusted pro forma net income (loss)				$	2,380			$	(18,259)			$	4,133			$	(17,461)

Denominator:	Denominator:																						Denominator:
		Weighted-average shares of Class A common stock outstanding—diluted			37,309				31,015				35,876				30,703					Weighted-average shares of Class A common stock outstanding—diluted				43,789				37,309				43,289				35,876
		Adjustments:																				Adjustments:
			Assumed exchange of LLC Interests for shares of Class A common stock⁽¹⁾	3,117			7,088				3,131				7,314							Assumed exchange of LLC Interests for shares of Class A common stock(1)		—				3,117				—				3,131
		Adjusted pro forma fully exchanged weighted-average shares of Class A common stock outstanding—diluted			40,426				38,103				39,007				38,017					Adjusted pro forma fully exchanged weighted-average shares of Class A common stock outstanding—diluted				43,789				40,426				43,289				39,007

Adjusted pro forma earnings (loss) per fully exchanged share—diluted	Adjusted pro forma earnings (loss) per fully exchanged share—diluted						$	(0.45)			$	0.27			$	(0.45)				$	0.40		Adjusted pro forma earnings (loss) per fully exchanged share—diluted					$	0.05			$	(0.45)			$	0.10			$	(0.45)


			Thirteen Weeks Ended								Twenty-Six Weeks Ended											Thirteen Weeks Ended						Twenty-Six Weeks Ended
					June 24 2020			June 26 2019			June 24 2020			June 26 2019					June 30 2021			June 24 2020			June 30 2021			June 24 2020
Earnings (loss) per share of Class A common stock - diluted	Earnings (loss) per share of Class A common stock - diluted				$	(0.43)		$	0.29		$	(0.48)		$	0.38		Earnings (loss) per share of Class A common stock - diluted		$	0.05		$	(0.43)		$	0.06		$	(0.48)
		Assumed exchange of LLC Interests for shares of Class A common stock⁽¹⁾		(0.01)			—			(0.01)			0.01			Assumed exchange of LLC Interests for shares of Class A common stock(1)		—			(0.01)			—			(0.01)
		Non-GAAP adjustments⁽⁸⁾		(0.01)			(0.02)			0.04			0.01			Non-GAAP adjustments(9)		—			(0.01)			0.04			0.04
Adjusted pro forma earnings (loss) per fully exchanged share—diluted	Adjusted pro forma earnings (loss) per fully exchanged share—diluted				$	(0.45)		$	0.27		$	(0.45)		$	0.40		Adjusted pro forma earnings (loss) per fully exchanged share—diluted		$	0.05		$	(0.45)		$	0.10		$	(0.45)

(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)Represents costs incurred in connection with our executive search, including fees paid to an executive recruiting firm.

(3)Represents consulting and advisory fees related to our enterprise-wide system upgrade initiative called Project Concrete.

(4) ~~Represents costs associated with establishing our first international office in Hong Kong.~~

~~(5) Represents incremental expenses~~Expense incurred ~~related~~ to establish an ~~inventory adjustment and certain employee-related expenses.~~

~~(6) Represents tax effect of change in tax basis~~accrual related to the ~~adoption~~settlement of a legal matter. Refer to Note 13, Commitments and Contingencies, in the ~~new lease accounting standard~~ accompanying Condensed Consolidated Financial Statements, for additional information.

(5)Costs incurred in connection with the ~~thirteen~~Company’s Convertible Notes, issued in March 2021, including consulting and ~~twenty-six weeks ended June 26, 2019.~~advisory fees. Refer to Note 6, Debt, in the accompanying Condensed Consolidated Financial Statements, for additional information.

(6)Expense incurred in connection with the Company's amendments on the Revolving Credit Facility, including the write-off of previously capitalized costs on the Revolving Credit Facility. Refer to Note 6, Debt, in the accompanying Condensed Consolidated Financial Statements, for additional information.

(7)Represents the tax effect of the aforementioned adjustments and pro forma adjustments to reflect corporate income taxes at assumed effective tax rates of ~~24.1%~~27.0% and ~~30.2%~~167.8% for the thirteen and twenty-six weeks ended June ~~24, 2020,~~30, 2021, respectively, and ~~19.3%~~24.1% and ~~19.4%~~30.2% for the thirteen and twenty-six weeks ended June ~~26, 2019,~~24, 2020, respectively. Amounts include provisions for U.S. federal income taxes, certain LLC entity-level taxes and foreign withholding taxes, assuming the highest statutory rates apportioned to each applicable state, local and foreign jurisdiction. Additionally, the thirteen and twenty-six weeks endedJune 24, 2020 includes the establishment of a valuation allowance.

(8)Represents incremental expenses incurred related to an inventory adjustment and certain employee-related expenses.

(9)Represents the per share impact of non-GAAP adjustments for each period. Refer to the reconciliation of Adjusted Pro Forma Net Income (Loss) above, for ~~further details.~~additional information.

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LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash

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. In March 2021, we issued 0% Convertible Senior Notes (“Convertible Notes”), and received $243.8 million of proceeds, net of discounts. Refer to Note 6, Debt, in the accompanying Condensed Consolidated Financial Statements, for additional information.

As of June ~~24, 2020,~~30, 2021, we maintained a ~~cash~~Cash and cash equivalents balance of ~~$174.0~~$340.1 million and a short-term investments balance of ~~$16.8 million.~~$80.1 million within Marketable securities.

On June ~~8, 2018,~~7, 2021, we filed a Registration Statement on Form S-3 with the SEC which permits us to issue a combination of securities described in the prospectus in one or more offerings from time to time. To date, we have not experienced difficulty accessing the capital markets; however, future volatility in the capital markets may affect our ability to access those markets or increase the costs associated with issuing debt or equity instruments.

Our primary requirements for liquidity are to fund our working capital needs, operating and finance lease obligations, capital expenditures and general corporate needs. Our requirements for working capital are generally not significant because our guests pay for their food and beverage purchases in cash or on debit or credit cards at the time of the sale and we are able to sell many of our inventory items before payment is due to the supplier of such items. Our ongoing capital expenditures are principally related to opening new Shacks, existing Shack capital investments (both for remodels and maintenance), as well as investments in our corporate and digital infrastructure.

In addition, we are obligated to make payments to certain members of SSE Holdings under the Tax Receivable Agreement. As of June ~~24, 2020,~~30, 2021, such obligations totaled ~~$228.1~~$234.0 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. If we do not generate sufficient taxable income in the aggregate over the term of the Tax Receivable Agreement to utilize the tax benefits, then we would not be required to make the related TRA Payments. Although the amount of any payments that must be made under the Tax Receivable Agreement may be significant, the timing of these payments will vary and will generally be limited to one payment per member per year. The amount of such payments are also limited to the extent we utilize the related deferred tax assets. The payments that we are required to make will generally reduce the amount of overall cash flow that might have otherwise been available to us or to SSE Holdings, but we expect the cash tax savings we will realize from the utilization of the related deferred tax assets to fund the required payments.

~~COVID-19 Pandemic~~

In response to the uncertain market conditions resulting from the onset of the COVID-19 pandemic, we ~~have taken~~took the following ~~actions.~~actions in fiscal 2020.

•On April 17, 2020, we announced an ~~ATM Program,~~"at-the-market" equity offering program (the "ATM Program"), under which we may offer and sell shares of our Class A common stock having an aggregate price of up to $75.0 million from time to time. On April 21, 2020, we completed the sale of 233,467 shares of our Class A common stock pursuant to the ATM Program and received $9.8 million of proceeds, net of commissions. The proceeds were used to purchase newly-issued LLC Interests.

•On April 21, 2020, we completed an underwritten offering of 3,416,070 shares of our Class A common stock, resulting in $135.9 million of proceeds, net of underwriting discounts and commissions. The proceeds were used to purchase newly-issued LLC Interests.

•In May 2020, we entered into an amendment to our Revolving Credit Facility that ~~provides~~provided for a number of enhanced modifications to reflect the current and ongoing impact from COVID-19. Our Revolving Credit Facility was further amended in March 2021, resulting in a modification of the applicable covenants and restrictions in the Credit Agreement to permit the incurrence of the Convertible Notes, including obligations and transactions in connection therewith. Refer to Note 6, Debt, in the accompanying condensed consolidated financial statements, for additional information.

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•In March 2020, we drew down the full ~~$50,000~~$50.0 million available under the Revolving Credit Facility to enhance liquidity and financial flexibility given the uncertain market conditions created by the COVID-19 pandemic. We repaid this amount in full, plus interest, in June 2020. As of ~~June 24, 2020,~~March 31, 2021, we were in compliance with all covenants.

We believe our existing cash and marketable securities balances ~~combined with the actions we have taken in response to COVID-19,~~ will be sufficient to fund our operating and finance lease obligations, capital expenditures, ~~tax receivable agreement~~Tax Receivable Agreement obligations and working capital needs for at least the next 12 months and the foreseeable future.

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Summary of Cash Flows

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

Twenty-Six Weeks Ended
(in thousands) June 24
2020 June 26
2019
Net cash provided by operating activities $ 17,993 $ 35,891
Net cash used in investing activities (17,905) (29,713)
Net cash provided by (used in) financing activities 136,797 (1,195)
Increase in cash 136,885 4,983
Cash at beginning of period 37,099 24,750
Cash at end of period $ 173,984 $ 29,733


	Twenty-Six Weeks Ended
(in thousands)	June 30 2021		June 24 2020
Net cash provided by operating activities	$	37,005	$	17,993
Net cash used in investing activities	(87,969)		(17,905)
Net cash provided by financing activities	244,194		136,797
Increase in Cash and cash equivalents	193,230		136,885
Cash and cash equivalents at beginning of period	146,873		37,099
Cash and cash equivalents at end of period	$	340,103	$	173,984

Operating Activities

For the twenty-six weeks ended June ~~24, 2020~~30, 2021 net cash provided by operating activities was ~~$18.0~~$37.0 million compared to ~~$35.9~~$18.0 million for the twenty-six weeks ended June ~~26, 2019,~~24, 2020, an increase of $19.0 million. The increase was primarily due to an increase in net income of $21.7 million and the impact of non-cash charges of $0.9 million partially offset by a ~~decrease~~change in operating assets and liabilities of ~~$17.9~~$(3.6) million. ~~This decrease~~The $(3.6) million change in our operating asset and liability balances was primarily driven by ~~a decrease~~an increase in ~~Shack-level operating profit due to the impact~~and timing of ~~COVID-19, as well as~~rent payments, partially offset by higher ~~general~~accrued wages and ~~administrative costs including higher annual bonus payments.~~timing of cash receipts of receivables.

Investing Activities

For the twenty-six weeks ended June ~~24, 2020~~30, 2021 net cash used in investing activities was ~~$17.9~~$88.0 million compared to ~~$29.7~~$17.9 million ~~used in investing activities~~ for the twenty-six weeks ended June ~~26, 2019, a decrease~~24, 2020, an increase of ~~$11.8~~$70.1 million. This ~~decrease~~increase was primarily due to increased purchases of marketable securities of $47.0 million, a decrease of ~~$18.4 million in capital expenditures, as well as a decrease of $7.0~~$16.0 million of proceeds from sales of marketable ~~securities.~~securities and an increase of $7.1 million in capital expenditures to support our real estate development and digital initiatives.

Financing Activities

For the twenty-six weeks ended June ~~24, 2020~~30, 2021 net cash provided by financing activities was ~~$136.8~~$244.2 million compared to ~~net cash used in financing activities of $1.2~~$136.8 million for the twenty-six weeks ended June ~~26, 2019,~~24, 2020, an increase of ~~$138.0~~$107.4 million. This increase iswas primarily due to $243.8 million in net cash proceeds from the issuance of the Convertible Notes, net of discount, decreased payments made under the Tax Receivable Agreement, and increased proceeds from stock option exercises, partially offset by $145.7 million in net cash proceeds from the issuance of Class A common stock ~~partially offset by increased payments made under~~during the ~~Tax Receivable Agreement and distributions to our non-controlling interest holders.~~twenty-six weeks ended June 24, 2020.

Revolving Credit Facility

In August 2019, we ~~terminated our previous revolving credit facility and~~ entered into a ~~new~~ Revolving Credit Facility, ~~agreement,~~ which permits borrowings up to $50.0 million, of which the entire amount is available immediately, with the ability to increase available borrowings up to an additional $100.0 million, to be made available subject to satisfaction of certain conditions. The Revolving Credit Facility ~~will mature and all amounts outstanding will be due and payable in August 2024. The Revolving Credit Facility~~ also permits the issuance of letters of credit upon our request of up to $15.0 million. ~~Borrowings~~

In March 2020, we drew down the full $50.0 million available under the Revolving Credit ~~facility will bear~~Facility to enhance liquidity and financial flexibility given the uncertain market conditions created by the COVID-19 pandemic. We repaid this amount in full, plus interest, in June 2020.

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In May 2020, we entered into a First Amendment, which, among other things, provided for modified financial covenant compliance requirements for a period of time. The First Amendment required us to maintain minimum liquidity of $25.0 million through July 1, 2021 and outstanding borrowings during the applicable period covered by the First Amendment bore interest at either: (i) LIBOR plus a percentage ranging from 1.0% to ~~1.5%~~2.5% or (ii) the base rate plus a percentage ranging from 0.0% to ~~0.5%~~1.5%, in each case depending on our net lease adjusted leverage ratio. To

In March 2021, we entered into a Second Amendment. The Second Amendment modified the ~~extent~~applicable covenants and restrictions in the Credit Agreement to permit the incurrence of the Convertible Notes (as defined below), including obligations and transactions in connection therewith. In addition, the Second Amendment, among other things, (i) extended the period applicable to the increased interest rate margin as set forth in the First Amendment; (ii) shortened the maturity date of the Revolving Credit Facility from August 2024 to September 2022 and (iii) added mechanics relating to the transition from the use of LIBOR ~~reference rate is no longer available,~~to SOFR upon the discontinuance or unavailability of LIBOR.

Subsequently, and also in March 2021, we entered into a Third Amendment with JPMorgan Chase Bank, N.A. (as successor agent to Wells Fargo Bank, National Association), as administrative agent, and the lenders party thereto. In addition, in ~~consultation with us, will determine a replacement rate which will be generally in accordance with similar transactions in which it serves~~March 2021, Wells Fargo Bank resigned as administrative ~~agent.~~ agent under the Revolving Credit Facility and assigned its commitments thereunder to JPMorgan Bank, N.A. The Third Amendment appoints JPMorgan Bank, N.A. as administrative agent under the Revolving Credit Facility. In addition, the Third Amendment, among other things, extends the maturity date of the Revolving Credit Facility from September 2022 to March 2026. As of June 30, 2021 and December 30, 2020, no amounts were outstanding under the Revolving Credit Facility.

The Revolving Credit Facility requires us to comply with maximum net lease adjusted leverage and minimum fixed charge coverage ratios. We are not subject to these coverage ratios for a period of time due to the ~~First~~Second Amendment to the Revolving Credit Facility described ~~below.~~above. In addition, the Revolving Credit Facility contains other customary affirmative and negative covenants, including those which (subject to certain exceptions and dollar thresholds) limit our ability to incur debt; incur liens; make investments; engage in mergers, consolidations, liquidations or acquisitions; dispose of assets; make distributions on or repurchase equity securities; engage in transactions with affiliates; and prohibits us, with certain exceptions, from engaging in any line of business not related to our current line of business. As of June ~~24, 2020,~~30, 2021, we were in compliance with all covenants.

As of June 30, 2021, the Revolving Credit Facility had unamortized deferred financing costs of $0.1 million, and was included in Other assets on the Condensed Consolidated Balance Sheets. During the thirteen and twenty-six weeks ended June 30, 2021, total interest expense related to the Revolving Credit Facility were $0.04 million and $0.4 million, respectively and $0.4 million and $0.6 million, respectively, during thirteen and twenty-six weeks ended June 24, 2020. Total interest expense for the twenty-six weeks ended June 30, 2021 primarily included write-off of previously capitalized costs on the Revolving Credit Facility.

Convertible Notes

In March 2021, we issued $225.0 million aggregate principal amount of 0% Convertible Senior Notes due 2028 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933. We granted an option to the initial purchasers to purchase up to an additional $25.0 million aggregate principal amount of Convertible Notes to cover over-allotments, which was subsequently fully exercised during March 2021, resulting in a total issuance of $250.0 million aggregate principal amount of Convertible Notes. The Convertible Notes will mature on March 1, 2028, unless earlier converted, redeemed or repurchased in certain circumstances. Upon conversion, we pay or deliver, as the case may be, cash, shares of Class A common stock or a combination of cash and shares of Class A common stock, at our election.

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Inproduct of the last reported sale price of Class A common stock and the conversion rate for the Convertible Notes on each such trading day; (3) if we call such Convertible Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the Convertible Notes called (or deemed called) for redemption; and (4) upon the occurrence of specified corporate events as set forth in the Indenture. On or after December 1, 2027, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Convertible Notes may convert all or any portion of their Convertible Notes at any time, regardless of the foregoing circumstances.

We may not redeem the Convertible Notes prior to March ~~2020,~~6, 2025. We may redeem for cash all or any portion of the Convertible Notes, at our option, on or after March 6, 2025 if the last reported sale price of Class A common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we ~~drew down~~provide notice of redemption at a redemption price equal to 100% of the ~~full $50.0 million available under~~principal amount of the ~~Revolving Credit Facility~~Convertible Notes to ~~enhance liquidity~~be redeemed, plus accrued and ~~financial flexibility given~~unpaid special interest, if any, to, but excluding, the ~~uncertain market conditions created by the COVID-19 pandemic. We repaid the full amount we drew down plus interest in June 2020.~~redemption date.

In ~~May 2020,~~addition, if we undergo a fundamental change (as defined in the indenture governing the Convertible Notes), subject to certain conditions, holders may require us to repurchase for cash all or any portion of their Convertible Notes at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid special interest, if any, to, but excluding, the fundamental change repurchase date. In addition, following certain corporate events that occur prior to the maturity date of the Convertible Notes or if we deliver a notice of redemption in respect of some or all of the Convertible Notes, we will, in certain circumstances, increase the conversion rate of the Convertible Notes for a holder who elects to convert our Convertible Notes in connection with such a corporate event or convert our Convertible Notes called (or deemed called) for redemption during the related redemption period, as the case may be.

Contemporaneously with the issuance of the Convertible Notes, Shake Shack Inc. entered into an Intercompany Note with SSE Holdings, LLC. SSE Holdings promises to pay Shake Shack Inc., for value received, the principal amount with interest of the Intercompany Note in March 2028. Shake Shack Inc. will exercise its right to convert the Intercompany Note to maintain at all times a ~~First Amendment to~~one-to-one ratio between the ~~Revolving Credit Facility, which,~~number of common units, directly or indirectly, by Shake Shack Inc and the aggregate number of outstanding shares of common stock.

As of June 30, 2021, the Convertible Notes had a gross principal balance of $250.0 million and a balance of $243.0 million, net of unamortized discount and debt issuance costs of $7.0 million. As of June 30, 2021, the unamortized balance of discount and debt issuance costs was recorded as a contra-liability and netted with Long-term debt on the Condensed Consolidated Balance Sheets and was being amortized as interest expense using the effective interest method. Total amortization expense was $0.2 million and $0.3 million respectively, for thirteen and twenty-six weeks ended June 30, 2021 and was included in Interest expense in the Condensed Consolidated Statements of Income (Loss). In connection with the Convertible Notes, the Company also incurred consulting and advisory fees of $0.2 million for the twenty-six weeks ended June 30, 2021 and was included in General and administrative expense in the Condensed Consolidated Statements of Income (Loss).

At June 30, 2021, the fair value of the Convertible Notes was approximately $237.2 million, 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 ~~things, provides for modified financial covenant compliance requirements for~~factors, and is classified as a ~~period of time. The First Amendment requires us to maintain minimum liquidity of $25.0 million through July 1, 2021 and outstanding borrowings during~~Level 2 measurement within the applicable period covered by the First Amendment bear interest at either: (i) LIBOR plus a percentage ranging from 1.0% to 2.5% or (ii) the base rate plus a percentage ranging from 0.0% to 1.50%, in each case depending on our net lease adjusted leverage ratio.fair value hierarchy.

CONTRACTUAL OBLIGATIONS

There have been no material changes to the contractual obligations as disclosed in our Annual Report on Form 10-K for the fiscal year ended December ~~25, 2019,~~30, 2020, other than those made in the ordinary course of business.

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OFF-BALANCE SHEET ARRANGEMENTS

There have been no material changes to our off-balance sheet arrangements as disclosed in our Annual Report on Form 10-K for the fiscal year ended December ~~25, 2019.~~30, 2020.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our consolidated financial condition and results of operations is based upon the accompanying condensed consolidated financial statements and notes thereto, which have been prepared in accordance with GAAP. The preparation of the condensed consolidated financial statements requires us to make estimates, judgments and assumptions, which we believe to be reasonable, based on the information available. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. Variances in the estimates or assumptions used to actual experience could yield materially different accounting results. On an ongoing basis, we evaluate the continued appropriateness of our accounting policies and resulting estimates to make adjustments we consider appropriate under the facts and circumstances. There have been no significant changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the fiscal year ended December ~~25, 2019.~~30, 2020.

Recently Issued Accounting Pronouncements

~~See "Note 2:~~Refer to Note 2, Summary of Significant Accounting ~~Policies—Recently Issued Accounting Pronouncements”~~Policies under Part I, Item 1 of this Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes to our exposure to market risks as described in Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended December ~~25, 2019.~~30, 2020.

Item 4. Controls and Procedures.

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DISCLOSURE CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes to our internal control over financial reporting that occurred during the quarter ended June ~~24, 2020~~30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

The information required by this Item is incorporated by reference to Part I, Item 1, Note ~~15:~~13, Commitments and ~~Contingencies—Legal~~ Contingencies.

Item 1A. Risk Factors.

~~The following additional risk factors should be read in conjunction with~~There have been no material changes to the risk factors disclosed in ~~our~~the Company's Annual Report on Form 10-K for the fiscal year ended December ~~25, 2019, which are modified and updated by the risk factors set forth below.~~

Pandemics or disease outbreaks, such as the recent outbreak of the novel coronavirus (COVID-19 virus), have disrupted, and may continue to disrupt, our business, and have materially affected our operations and results of operations.

Pandemics or disease outbreaks such as the COVID-19 virus have and may continue to impact customer traffic at our restaurants, may make it more difficult to staff our restaurants and, in more severe cases, may cause a temporary inability to obtain supplies and increase commodity costs. In recent months, we were forced to temporarily close many of our restaurants and shifted to a “to-go” and curbside operating model in our domestic company-operated Shacks, and only recently have resumed limited sit-down dining in some areas. We have also modified hours or reductions in on-site staff, resulting in cancelled shifts for some of our employees. COVID-19 may also materially adversely affect our ability to implement our growth plans, including delays in construction of new restaurants or adversely impact our overall ability to successfully execute our plans to enter into new markets. These changes have negatively impacted our results of operations, and these and any additional changes may materially adversely affect our business or results of operations in the future, and may impact our liquidity or financial condition, particularly if these changes are in place for a significant amount of time.

In addition, our operations have been further disrupted when employees or employees of our business partners are suspected of having COVID-19 or other illnesses since this has required us or our business partners to quarantine some or all such employees and close and disinfect our impacted restaurant facilities. If a significant percentage of our workforce or the workforce of our business partners are unable to work, including because of illness or travel or government restrictions in connection with pandemics or disease outbreaks, our operations may be negatively impacted, potentially materially adversely affecting our business, liquidity, financial condition or results of operations. In addition, we are required by local and state regulations to report employees who have contacted or been exposed to the virus.

Furthermore, such viruses may be transmitted through human contact and airborne delivery, and the risk of contracting viruses could continue to cause employees or guests to avoid gathering in public places, which has had, and could further have, adverse effects on our restaurant guest traffic or the ability to adequately staff restaurants. We have been adversely affected when government authorities have imposed and continue to impose restrictions on public gatherings, human interactions, operations of restaurants or mandatory closures, seek voluntary closures, restrict hours of operations or impose curfews, restrict the import or export of products or if suppliers issue mass recalls of products. Additional regulation or requirements with respect to the compensation of our employees could also have an adverse effect on our business. Even if such measures are not implemented and a virus or other disease does not spread significantly within a specific area, the perceived risk of infection or health risk in such area may adversely affect our business, liquidity, financial condition and results of operations. Additionally, different jurisdictions have seen varying levels of outbreaks or resurgences in outbreaks, and corresponding differences in government responses, which may make it difficult for us to plan or forecast an appropriate response.

The COVID-19 pandemic and mitigation measures have also had an adverse impact on global economic conditions, which have had an adverse effect on our business and financial condition. The Company’s sales and operating results may be affected by

~~46 |~~ ~~Shake Shack Inc.~~ ~~Form 10-Q~~

~~Table of Contents~~

uncertain or changing economic and market conditions arising in connection with and in response to the COVID-19 pandemic, including prolonged periods of high unemployment, inflation, deflation, prolonged weak consumer demand, a decrease in consumer discretionary spending, political instability or other changes. The significance of the operational and financial impact to the Company will depend on how long and widespread the disruptions caused by COVID-19, and the corresponding response to contain the virus and treat those affected by it, prove to be.

The ability of local and international authorities in containing COVID-19 and limiting the spread of infections will impact our business operations. The U.S. and other countries may fail to fully contain COVID-19 or suffer a resurgence in COVID-19, which could have an adverse effect on our business and results of operations. While some state and local governments in the U.S. have started to remove or ease restrictions on certain businesses, including restaurants, there is no guarantee on when other jurisdictions will change their current policies, and jurisdictions that have reduced restrictions may reintroduce restrictions, as some have in those areas where there have been increased outbreak.

~~Our ability to use our net operating loss carryforwards may be subject to limitation.~~

As of December 25, 2019, our federal and state net operating loss (“NOL”) carryforwards, for income tax purposes were $104.8 million and $67.4 million, respectively. If not utilized, $53.0 million of our federal NOLs can be carried forward indefinitely, and the remainder will begin to expire in 2035. If not utilized, $6.2 million of our state NOL carryforwards can be carried forward indefinitely, and the remainder will begin to expire in 2023. Federal NOLs incurred in taxable years beginning after December 31, 2017 can be carried forward indefinitely, but the deductibility of federal NOLs in taxable years beginning after December 31, 2020, is subject to certain limitations.

In addition, under Section 382 of the Internal Revenue Code (“IRC”) of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” its ability to use its pre-change NOLs to offset its post-change income may be limited. A Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. In connection with the equity offering we conducted a Section 382 study to determine whether the use of our NOLs is limited. While we did not experience an ownership change related to the equity offering in April 2020, we did experience an ownership change in the second quarter of 2018.An ownership change under Section 382 of the IRC establishes an annual limitation to the amount of NOL carryforwards we could utilize to offset our taxable income in a single year. We are in the process of finalizing our analysis, we do not expect that the change in ownership that occurred in 2018 will limit our ability to utilize the NOLs before the expiration of the NOL carryforward period.We may experience ownership changes in the future, including as a result of this offering or subsequent changes in our stock ownership, some of which are outside our control. This could limit the amount of NOLs that we can utilize annually to offset future taxable income or tax liabilities. Subsequent statutory or regulatory changes in respect of the utilization of NOLs for federal or state purposes, such as suspensions on the use of NOLs or limitations on the deductibility of NOLs carried forward, or other unforeseen reasons, may result in our existing NOLs expiring or otherwise being unavailable to offset future income tax liabilities.

If we are unable to maintain compliance with the covenants contained in our current credit facility, we may be unable to make additional borrowings on any undrawn amounts and may be required to repay our then outstanding debt under the facility. In addition, global economic conditions may make it more difficult to access new credit facilities.

Our liquidity position is, in part, dependent upon our ability to borrow under our current credit facility. As disclosed in Part I, Item 1, Note 8: Debt, in August 2019, we entered into a credit facility with Wells Fargo Bank, National Association (“Wells Fargo”), providing for a $50.0 million senior secured Revolving Credit Facility with the ability to increase available borrowings under the credit facility by up to an additional $100.0 million through incremental term and/or revolving credit commitments, subject to the satisfaction of certain conditions set forth in the facility. We are required to comply with maximum net lease adjusted leverage and minimum fixed charge coverage ratios, in addition to other customary affirmative and negative covenants, including those which (subject to certain exceptions and dollar thresholds) limit our ability to incur debt; incur liens; make investments; engage in mergers, consolidations, liquidations or acquisitions; dispose of assets; make distributions on or repurchase equity securities; engage in transactions with affiliates; and prohibits us, with certain exceptions, from engaging in any line of business not related to our current line of business. In May 2020, we entered into a first amendment to the Revolving Credit Facility (“First Amendment”), which, among other things, provides for modified financial covenant compliance requirements for a period of time. The First Amendment requires us to maintain minimum liquidity of $25,000 through July 1, 2021 and outstanding borrowings during the applicable period covered by the First Amendment bear interest at either: (i) LIBOR plus a percentage ranging from

~~Shake Shack Inc.~~ ~~Form 10-Q~~ | 47

~~Table of Contents~~

1.0% to 2.5% or (ii) the base rate plus a percentage ranging from 0.0% to 1.50%, in each case depending on our net lease adjusted leverage ratio. As of June 24, 2020, we were in compliance with all covenants, however, a failure to comply with the financial covenants under our credit facility would give rise to an event of default under the term of the credit facility, allowing the lenders to refuse to lend additional available amounts to us and giving them the right to terminate the facility and accelerate repayment of any outstanding debt under the credit facility. As a result, we may need to access other capital to address our liquidity needs rather than relying on our credit facility. Our cash resources and liquidity would be substantially impaired by an acceleration of the debt under our credit facility.30, 2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

48 | Shake Shack Inc.

Form 10-Q

Table of Contents

Item 6. Exhibits.

Exhibit
Number
Incorporated by Reference Filed
Herewith
Exhibit Description Form Exhibit Filing Date
3.1
Amended and Restated Certificate of Incorporation of Shake Shack Inc., effective February 4, 2015
8-K 3.1 2/10/2015
3.2
Second Amended and Restated Bylaws of Shack Shake Inc., dated October 1, 2019
8-K 3.1 10/4/2019
4.1
Form of Class A Common Stock Certificate
S-1/A 4.1 1/28/2015
10.1
Amendment No. 3 dated March 31, 2020 to Third Amended and Restated Limited Liability Company Agreement of SSE Holdings, LLC
#
10.2
Distribution Agreement dated April 17, 2020 by and among Shake Shack Inc., J.P. Morgan Securities LLC, BofA Securities, Inc., and Wells Fargo Securities LLC
8-K 1.1 4/17/2020
10.3
Underwriting Agreement dated April 17, 2020 between Shake Shack Inc. and J.P. Morgan Securities LLC
8-K 1.1 4/21/2020
10.4
First Amendment to Credit Agreement, dated as of May 4, 2020, by and among SSE Holdings, LLC, the Guarantors party thereto, the Lenders party thereto, and Wells Fargo Bank, National Association, as Administrative Agent
10-Q 10.3 5/4/2020
10.5
Letter Agreement, dated June 18, 2020, between Tristan Walker and Shake Shack Inc.
8-K 1.1 6/18/2020
31.1
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*
31.2
Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*
32
Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
#
101.INS XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document *
101.SCH XBRL Taxonomy Extension Schema Document *
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document *
101.DEF XBRL Taxonomy Extension Definition Linkbase Document *
101.LAB XBRL Taxonomy Extension Label Linkbase Document *
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document *
104 Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document *

Exhibit

Number

Incorporated by Reference

Filed
Herewith

Exhibit Description

Form

Exhibit

Filing Date

3.1

Amended and Restated Certificate of Incorporation of Shake Shack Inc., effective February 4, 2015

8-K

3.1

2/10/2015

3.2

Second Amended and Restated Bylaws of Shack Shake Inc., dated October 1, 2019

8-K

3.1

10/4/2019

4.1

Form of Class A Common Stock Certificate

S-1/A

4.1

1/28/2015

10.1

E mployment Agreement , effective as of June 14, 2021, by and among Katherine Fogertey, Shake Shack Inc., SSE Holdings, LLC and Shake Shack Enterprises, LLC

8-K

10.1

6/9/2021

31.1

Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

# Furnished herewith.

Shake Shack Inc.

Form 10-Q | 49

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	Shake Shack Inc.
	(Registrant)

Date: ~~July 31, 2020~~August 6, 2021	By:	/s/ Randy Garutti
		Randy Garutti
		Chief Executive Officer (Principal Executive Officer and Duly Authorized Officer)

Date: ~~July 31, 2020~~August 6, 2021	By:	/s/ ~~Tara Comonte~~Katherine I. Fogertey
		~~Tara Comonte~~Katherine I. Fogertey
		~~President and~~ Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer)

50 | Shake Shack Inc.

Form 10-Q


		Page
Note 1	Nature of Operations	10
Note 2	Summary of Significant Accounting Policies	10
Note 3	Revenue	11
Note 4	Fair Value Measurements	12


Note 5	~~Inventories~~Supplemental Balance Sheet Information	14
Note 6	~~Property and Equipment~~Debt	14
~~Note 7~~	~~Supplemental Balance Sheet Information~~	15
~~Note 8~~	~~Debt~~	15

Note 97	Leases	16
Note 108	Non-Controlling Interests	1819
Note 119	Equity-Based Compensation	20
Note 1210	Income Taxes	21
Note 1311	Earnings (Loss) Per Share	2322
Note 1412	Supplemental Cash Flow Information	24
Note 1513	Commitments and Contingencies	2524
Note 1614	Related Party Transactions	2625


		June 24, 2020
			Cost Basis			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value			Cash and Cash Equivalents			Marketable Securities
Cash			$	173,984		$	—		$	—		$	173,984		$	173,984		$	—
Level 1:
	Money market funds	—			—			—			—			—			—
	Mutual funds	16,783			50			—			16,833			—			16,833


Total			$	190,767		$	50		$	—		$	190,817		$	173,984		$	16,833


	June 24 2020		December 25 2019
Food	$	1,498	$	1,738
Wine	95		107
Beer	109		114
Beverages	211		233
Retail merchandise	18		29
Paper goods	415		—
Inventories	$	2,346	$	2,221


	June 24 2020		December 25 2019
Leasehold improvements	$	321,137	$	302,204

Equipment	57,669		54,404
Furniture and fixtures	18,986		18,082
Computer equipment and software	25,544		24,226
Financing equipment lease assets	8,383		7,442
Construction in progress	32,293		30,290
Property and equipment, gross	464,012		436,648
Less: accumulated depreciation	141,850		121,786
Property and equipment, net	$	322,162	$	314,862


	First Quarter			Second Quarter												Third Quarter

(dollar amounts in thousands)	March 25			April 22			May 20			June 24			July 22
Average weekly sales*	$	56		$	32		$	50		$	52		$	56
Total year-over-year sales growth (decline)	(11)		%	(56)		%	(32)		%	(32)		%	(23)		%
Same-Shack sales %	(29)		%	(64)		%	(42)		%	(42)		%	(39)		%