Financial News

Shake Shack Announces Third Quarter 2022 Financial Results

  • Total revenue of $227.8 million, up 17.5% versus 2021, including $219.5 million of Shack sales and $8.3 million of Licensing revenue.
  • System-wide sales of $353.2 million, up 18.3% versus 2021.
  • Same-Shack sales up 6.3% versus 2021.
  • Operating loss of $4.8 million.
    • Shack-level operating profit(1) of $35.8 million, or 16.3% of Shack sales.
  • Net loss of $2.3 million.
    • Adjusted EBITDA(1) of $19.5 million.
  • Net loss attributable to Shake Shack Inc. of $2.0 million, or a loss of $0.05 per share.
    • Adjusted pro forma net loss(1) of $2.3 million, or a loss of $0.06 per fully exchanged and diluted share.
  • Opened 2 new domestic Company-operated Shacks. Opened 6 new licensed Shacks, including locations in China and Korea.

Shake Shack Inc. (“Shake Shack” or the “Company”) (NYSE: SHAK) has posted its results for the third quarter of 2022 in a Shareholder Letter in the Quarterly Results section of the Company's Investor Relations website, which can be found here: Q3 2022 Shake Shack Shareholder Letter.

Shake Shack will host a conference call at 8:00 a.m. ET. Hosting the call will be Randy Garutti, Chief Executive Officer, and Katherine Fogertey, Chief Financial Officer. The conference call can be accessed live over the phone by dialing (877) 407-0792, or for international callers by dialing (201) 689-8263. A replay of the call will be available until November 10, 2022 by dialing (844) 512-2921 or for international callers by dialing (412) 317-6671; the passcode is 13732788.

The live audio webcast of the conference call will be accessible in the Events & Presentations section of the Company's Investor Relations website at investor.shakeshack.com. An archived replay of the webcast will also be available shortly after the live event has concluded.

(1)

 

Shack-level operating profit, Adjusted EBITDA and Adjusted pro forma net income (loss) are non-GAAP measures. A reconciliation to the most directly comparable financial measures presented in accordance with GAAP is set forth in the schedules accompanying this release. See “Non-GAAP Financial Measures” below.

About Shake Shack

Shake Shack serves elevated versions of American classics using only the best ingredients. It’s known for its delicious made-to-order Angus beef burgers, crispy chicken, hand-spun milkshakes, house-made lemonades, beer, wine, and more. With its high-quality food at a great value, warm hospitality, and a commitment to crafting uplifting experiences, Shake Shack quickly became a cult-brand with widespread appeal. Shake Shack’s purpose is to Stand For Something Good®, from its premium ingredients and employee development, to its inspiring designs and deep community investment. Since the original Shack opened in 2004 in NYC’s Madison Square Park, the Company has expanded to over 400 locations system-wide, including over 260 in 32 U.S. States and the District of Columbia, and over 140 international locations across London, Hong Kong, Shanghai, Singapore, Mexico City, Istanbul, Dubai, Tokyo, Seoul and more.

Skip the line with the Shack App, a mobile ordering app that lets you save time by ordering ahead! Guests can select their location, pick their food, choose a pickup time and their meal will be cooked-to-order and timed to arrival. Available on iOS and Android.

Definitions

The following definitions apply to these terms as used in this release:

"Shack sales" is defined as the aggregate sales of food, beverages, gift card breakage income and Shake Shack branded merchandise at domestic Company-operated Shacks and excludes sales from licensed Shacks.

“System-wide sales” is an operating measure and consists of sales from the Company's domestic Company-operated Shacks, domestic licensed Shacks and international licensed Shacks. The Company does not recognize the sales from licensed Shacks as revenue. Of these amounts, revenue is limited to licensing revenue based on a percentage of sales from domestic and international licensed Shacks, as well as certain up-front fees, such as territory fees and opening fees.

"Same-Shack sales" represents Shack sales for the comparable Shack base, which is defined as the number of domestic Company-operated Shacks open for 24 full fiscal months or longer. For consecutive days that Shacks were temporarily closed, the comparative period was also adjusted.

"Shack-level operating profit," a non-GAAP measure, is defined as Shack sales less Shack-level operating expenses including Food and paper costs, Labor and related expenses, Other operating expenses and Occupancy and related expenses.

"Shack-level operating profit margin," a non-GAAP measure, is defined as Shack sales less Shack-level operating expenses including Food and paper costs, Labor and related expenses, Other operating expenses and Occupancy and related expenses as a percentage of Shack sales.

“EBITDA,” a non-GAAP measure, is defined as Net income (loss) before interest expense (net of interest income), Income tax expense (benefit), and Depreciation and amortization expense.

“Adjusted EBITDA,” a non-GAAP measure, is defined as EBITDA (as defined above), excluding equity-based compensation expense, deferred lease costs, Impairment and loss on disposal of assets, amortization of cloud-based software implementation costs, as well as certain non-recurring items that the Company does not believe directly reflect its core operations and may not be indicative of the Company's recurring business operations.

"Adjusted pro forma net income," a non-GAAP measure, represents 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 and other items that the Company does not believe directly reflect its core operations and may not be indicative of the Company's recurring business operations.

SHAKE SHACK INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share amounts)

     

 

 

September 28

2022

 

December 29

2021

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

256,998

 

 

$

302,406

Marketable securities

 

 

80,015

 

 

 

80,000

Accounts receivable, net

 

 

11,800

 

 

 

13,657

Inventories

 

 

3,996

 

 

 

3,850

Prepaid expenses and other current assets

 

 

14,246

 

 

 

9,763

Total current assets

 

 

367,055

 

 

 

409,676

Property and equipment, net of accumulated depreciation of $271,938 and $222,768, respectively

 

 

441,870

 

 

 

389,386

Operating lease assets

 

 

370,536

 

 

 

347,277

Deferred income taxes, net

 

 

306,976

 

 

 

298,668

Other assets

 

 

15,330

 

 

 

12,563

TOTAL ASSETS

 

$

1,501,767

 

 

$

1,457,570

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

17,210

 

 

$

19,947

Accrued expenses

 

 

49,387

 

 

 

36,892

Accrued wages and related liabilities

 

 

17,758

 

 

 

14,638

Operating lease liabilities, current

 

 

40,690

 

 

 

35,519

Other current liabilities

 

 

19,497

 

 

 

14,501

Total current liabilities

 

 

144,542

 

 

 

121,497

Long-term debt

 

 

244,328

 

 

 

243,542

Long-term operating lease liabilities

 

 

429,165

 

 

 

400,113

Liabilities under tax receivable agreement, net of current portion

 

 

234,892

 

 

 

234,045

Other long-term liabilities

 

 

20,588

 

 

 

22,773

Total liabilities

 

 

1,073,515

 

 

 

1,021,970

Commitments and contingencies

 

 

 

 

Stockholders' equity:

 

 

 

 

Preferred stock, no par value—10,000,000 shares authorized; none issued and outstanding as of September 28, 2022 and December 29, 2021.

 

 

 

 

 

Class A common stock, $0.001 par value—200,000,000 shares authorized; 39,279,699 and

39,142,397 shares issued and outstanding as of September 28, 2022 and December 29, 2021, respectively.

 

 

39

 

 

 

39

Class B common stock, $0.001 par value—35,000,000 shares authorized; 2,869,513 and

2,921,587 shares issued and outstanding as of September 28, 2022 and December 29, 2021, respectively.

 

 

3

 

 

 

3

Additional paid-in capital

 

 

413,274

 

 

 

405,940

Retained earnings (accumulated deficit)

 

 

(9,820

)

 

 

3,554

Accumulated other comprehensive income (loss)

 

 

(1

)

 

 

1

Total stockholders' equity attributable to Shake Shack Inc.

 

 

403,495

 

 

 

409,537

Non-controlling interests

 

 

24,757

 

 

 

26,063

Total equity

 

 

428,252

 

 

 

435,600

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

1,501,767

 

 

$

1,457,570

SHAKE SHACK INC.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(UNAUDITED)

(in thousands, except per share amounts)

     

 

 

Thirteen Weeks Ended

 

Thirty-Nine Weeks Ended

 

 

September 28

2022

 

September 29

2021

 

September 28

2022

 

September 29

2021

Shack sales

 

$

219,501

 

 

96.4

%

 

$

186,972

 

 

96.4

%

 

$

639,346

 

 

96.6

%

 

$

519,110

 

 

96.7

%

Licensing revenue

 

 

8,313

 

 

3.6

%

 

 

6,923

 

 

3.6

%

 

 

22,611

 

 

3.4

%

 

 

17,527

 

 

3.3

%

TOTAL REVENUE

 

 

227,814

 

 

100.0

%

 

 

193,895

 

 

100.0

%

 

 

661,957

 

 

100.0

%

 

 

536,637

 

 

100.0

%

Shack-level operating expenses(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Food and paper costs

 

 

67,774

 

 

30.9

%

 

 

57,925

 

 

31.0

%

 

 

193,645

 

 

30.3

%

 

 

157,472

 

 

30.3

%

Labor and related expenses

 

 

64,638

 

 

29.4

%

 

 

58,208

 

 

31.1

%

 

 

190,954

 

 

29.9

%

 

 

157,221

 

 

30.3

%

Other operating expenses

 

 

33,966

 

 

15.5

%

 

 

26,613

 

 

14.2

%

 

 

96,766

 

 

15.1

%

 

 

74,032

 

 

14.3

%

Occupancy and related expenses

 

 

17,337

 

 

7.9

%

 

 

14,640

 

 

7.8

%

 

 

50,270

 

 

7.9

%

 

 

43,427

 

 

8.4

%

General and administrative expenses

 

 

26,645

 

 

11.7

%

 

 

20,504

 

 

10.6

%

 

 

87,040

 

 

13.1

%

 

 

60,435

 

 

11.3

%

Depreciation and amortization expense

 

 

18,647

 

 

8.2

%

 

 

15,183

 

 

7.8

%

 

 

53,589

 

 

8.1

%

 

 

43,381

 

 

8.1

%

Pre-opening costs

 

 

3,041

 

 

1.3

%

 

 

2,933

 

 

1.5

%

 

 

8,576

 

 

1.3

%

 

 

8,767

 

 

1.6

%

Impairment and loss on disposal of assets

 

 

592

 

 

0.3

%

 

 

535

 

 

0.3

%

 

 

1,697

 

 

0.3

%

 

 

1,262

 

 

0.2

%

TOTAL EXPENSES

 

 

232,640

 

 

102.1

%

 

 

196,541

 

 

101.4

%

 

 

682,537

 

 

103.1

%

 

 

545,997

 

 

101.7

%

LOSS FROM OPERATIONS

 

 

(4,826

)

 

(2.1

)%

 

 

(2,646

)

 

(1.4

)%

 

 

(20,580

)

 

(3.1

)%

 

 

(9,360

)

 

(1.7

)%

Other income, net

 

 

1,482

 

 

0.7

%

 

 

18

 

 

%

 

 

1,731

 

 

0.3

%

 

 

157

 

 

%

Interest expense

 

 

(475

)

 

(0.2

)%

 

 

(350

)

 

(0.2

)%

 

 

(1,145

)

 

(0.2

)%

 

 

(1,224

)

 

(0.2

)%

LOSS BEFORE INCOME TAXES

 

 

(3,819

)

 

(1.7

)%

 

 

(2,978

)

 

(1.5

)%

 

 

(19,994

)

 

(3.0

)%

 

 

(10,427

)

 

(1.9

)%

Benefit from income taxes

 

 

(1,508

)

 

(0.7

)%

 

 

(576

)

 

(0.3

)%

 

 

(5,098

)

 

(0.8

)%

 

 

(10,665

)

 

(2.0

)%

NET INCOME (LOSS)

 

 

(2,311

)

 

(1.0

)%

 

 

(2,402

)

 

(1.2

)%

 

 

(14,896

)

 

(2.3

)%

 

 

238

 

 

%

Less: Net loss attributable to non-controlling interests

 

 

(287

)

 

(0.1

)%

 

 

(224

)

 

(0.1

)%

 

 

(1,522

)

 

(0.2

)%

 

 

(837

)

 

(0.2

)%

NET INCOME (LOSS) ATTRIBUTABLE TO SHAKE SHACK INC.

 

$

(2,024

)

 

(0.9

)%

 

$

(2,178

)

 

(1.1

)%

 

$

(13,374

)

 

(2.0

)%

 

$

1,075

 

 

0.2

%

Earnings (loss) per share of Class A common stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.05

)

 

 

 

$

(0.06

)

 

 

 

$

(0.34

)

 

 

 

$

0.03

 

 

 

Diluted

 

$

(0.05

)

 

 

 

$

(0.06

)

 

 

 

$

(0.34

)

 

 

 

$

0.01

 

 

 

Weighted average shares of Class A common stock outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

39,274

 

 

 

 

 

39,137

 

 

 

 

 

39,221

 

 

 

 

 

39,066

 

 

 

Diluted

 

 

39,274

 

 

 

 

 

39,137

 

 

 

 

 

39,221

 

 

 

 

 

43,448

 

 

 

___________________

(1)

 

As a percentage of Shack sales.

SHAKE SHACK INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

   

 

 

Thirty-Nine Weeks Ended

 

 

September 28

2022

 

September 29

2021

OPERATING ACTIVITIES

 

 

 

 

Net income (loss) (including amounts attributable to non-controlling interests)

 

$

(14,896

)

 

$

238

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities

 

 

 

 

Depreciation and amortization expense

 

 

53,589

 

 

 

43,381

 

Amortization of debt issuance costs

 

 

786

 

 

 

605

 

Amortization of cloud computing asset

 

 

1,080

 

 

 

935

 

Non-cash operating lease cost

 

 

43,159

 

 

 

37,213

 

Equity-based compensation

 

 

10,155

 

 

 

5,963

 

Deferred income taxes

 

 

12,215

 

 

 

9,708

 

Loss on sale of marketable securities

 

 

 

 

 

5

 

Non-cash interest expense

 

 

181

 

 

 

348

 

Impairment and loss on disposal of assets

 

 

1,697

 

 

 

1,262

 

Unrealized loss on equity securities

 

 

400

 

 

 

117

 

Other non-cash income

 

 

(2

)

 

 

(2

)

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

 

1,840

 

 

 

(1,847

)

Inventories

 

 

(146

)

 

 

(637

)

Prepaid expenses and other current assets

 

 

(4,767

)

 

 

4,233

 

Other assets

 

 

(5,966

)

 

 

(767

)

Accounts payable

 

 

(2,069

)

 

 

(6,780

)

Accrued expenses

 

 

(17,783

)

 

 

(18,682

)

Accrued wages and related liabilities

 

 

3,052

 

 

 

3,709

 

Other current liabilities

 

 

4,376

 

 

 

(2,202

)

Long-term operating lease liabilities

 

 

(32,558

)

 

 

(31,886

)

Other long-term liabilities

 

 

(10

)

 

 

(1,174

)

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

 

54,333

 

 

 

43,740

 

INVESTING ACTIVITIES

 

 

 

 

Purchases of property and equipment

 

 

(94,797

)

 

 

(68,852

)

Purchases of marketable securities

 

 

(415

)

 

 

(47,321

)

Sales of marketable securities

 

 

 

 

 

4,004

 

NET CASH USED IN INVESTING ACTIVITIES

 

 

(95,212

)

 

 

(112,169

)

FINANCING ACTIVITIES

 

 

 

 

Proceeds from issuance of convertible notes, net of discount

 

 

 

 

 

243,750

 

Deferred financing costs

 

 

 

 

 

(123

)

Payments on principal of finance leases

 

 

(2,260

)

 

 

(1,982

)

Distributions paid to non-controlling interest holders

 

 

(389

)

 

 

(878

)

Debt issuance costs

 

 

 

 

 

(968

)

Proceeds from stock option exercises

 

 

334

 

 

 

6,688

 

Employee withholding taxes related to net settled equity awards

 

 

(2,214

)

 

 

(3,510

)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

 

 

(4,529

)

 

 

242,977

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

(45,408

)

 

 

174,548

 

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

 

302,406

 

 

 

146,873

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

256,998

 

 

$

321,421

 

SHAKE SHACK INC.

NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

To supplement the consolidated financial statements, which are prepared and presented in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company uses the following non-GAAP financial measures: Shack-level operating profit, Shack-level operating profit margin, EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted pro forma net income (loss) and adjusted pro forma earnings (loss) per fully exchanged and diluted share (collectively the "non-GAAP financial measures").

Shack-Level Operating Profit

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

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 the Company believes are useful measures to evaluate the performance and profitability of its Shacks. Additionally, Shack-level operating profit and Shack-level operating profit margin are key metrics used internally by management to develop internal budgets and forecasts, as well as assess the performance of its Shacks relative to budget and against prior periods. It is also used to evaluate employee compensation as it serves as a metric in certain performance-based employee bonus arrangements. The Company believes presentation of Shack-level operating profit and Shack-level operating profit margin provides investors with a supplemental view of its operating performance that can provide meaningful insights to the underlying operating performance of the Shacks, as these measures depict the operating results that are directly impacted by the Shacks and exclude items that may not be indicative of, or are unrelated to, the ongoing operations of the Shacks. It may also assist investors to evaluate the Company's performance relative to peers of various sizes and maturities and provides greater transparency with respect to how management evaluates the business, as well as 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 and administrative expenses and Pre-opening costs, which are considered normal, recurring cash operating expenses and are essential to support the operation and development of the Company's Shacks. Therefore, this measure may not provide a complete understanding of the Company's operating results as a whole and Shack-level operating profit and Shack-level operating profit margin should be reviewed in conjunction with the Company's GAAP financial results. A reconciliation of Shack-level operating profit to Loss from Operations, the most directly comparable GAAP financial measure, is set forth below.

 

 

Thirteen Weeks Ended

 

Thirty-Nine Weeks Ended

(dollar amounts in thousands)

 

September 28

2022

 

September 29

2021

 

September 28

2022

 

September 29

2021

Loss from operations

 

$

(4,826

)

 

$

(2,646

)

 

$

(20,580

)

 

$

(9,360

)

Less:

 

 

 

 

 

 

 

 

Licensing revenue

 

 

8,313

 

 

 

6,923

 

 

 

22,611

 

 

 

17,527

 

Add:

 

 

 

 

 

 

 

 

General and administrative expenses

 

 

26,645

 

 

 

20,504

 

 

 

87,040

 

 

 

60,435

 

Depreciation and amortization expense

 

 

18,647

 

 

 

15,183

 

 

 

53,589

 

 

 

43,381

 

Pre-opening costs

 

 

3,041

 

 

 

2,933

 

 

 

8,576

 

 

 

8,767

 

Impairment and loss on disposal of assets

 

 

592

 

 

 

535

 

 

 

1,697

 

 

 

1,262

 

Shack-level operating profit

 

$

35,786

 

 

$

29,586

 

 

$

107,711

 

 

$

86,958

 

 

 

 

 

 

 

 

 

 

Total revenue

 

$

227,814

 

 

$

193,895

 

 

$

661,957

 

 

$

536,637

 

Less: Licensing revenue

 

 

8,313

 

 

 

6,923

 

 

 

22,611

 

 

 

17,527

 

Shack sales

 

$

219,501

 

 

$

186,972

 

 

$

639,346

 

 

$

519,110

 

 

 

 

 

 

 

 

 

 

Shack-level operating profit margin(1,2)

 

 

16.3

%

 

 

15.8

%

 

 

16.8

%

 

 

16.8

%

___________________

(1)

 

As a percentage of Shack sales.

(2)

 

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

SHAKE SHACK INC.

NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

EBITDA and Adjusted EBITDA

EBITDA is defined as Net income (loss) before interest expense (net of interest income), Income tax expense (benefit) and Depreciation and amortization expense. Adjusted EBITDA is defined as EBITDA (as defined above) excluding equity-based compensation expense, deferred lease costs, Impairment and loss on the disposal of assets, amortization of cloud-based software implementation costs, as well as certain non-recurring items that the Company does not believe directly reflect its core operations and may not be indicative of the Company's 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 the Company believes are useful measures to facilitate comparisons to historical performance and competitors' operating results. Adjusted EBITDA is a key metric used internally by management to develop internal budgets and forecasts and also serves as a metric in its performance-based equity incentive programs and certain bonus arrangements. The Company believes presentation of EBITDA and adjusted EBITDA provides investors with a supplemental view of the Company's operating performance that facilitates analysis and comparisons of its ongoing business operations because they exclude items that may not be indicative of the Company's 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 the Company's performance and should be reviewed in conjunction with the GAAP financial measures. A reconciliation of EBITDA and adjusted EBITDA to Net income (loss) the most directly comparable GAAP measure, is as follows.

 

 

Thirteen Weeks Ended

 

Thirty-Nine Weeks Ended

(dollar amounts in thousands)

 

September 28

2022

 

September 29

2021

 

September 28

2022

 

September 29

2021

Net income (loss)

 

$

(2,311

)

 

$

(2,402

)

 

$

(14,896

)

 

$

238

 

Depreciation and amortization expense

 

 

18,647

 

 

 

15,183

 

 

 

53,589

 

 

 

43,381

 

Interest expense, net

 

 

475

 

 

 

350

 

 

 

1,145

 

 

 

1,224

 

Benefit from income taxes

 

 

(1,508

)

 

 

(576

)

 

 

(5,098

)

 

 

(10,665

)

EBITDA

 

 

15,303

 

 

 

12,555

 

 

 

34,740

 

 

 

34,178

 

 

 

 

 

 

 

 

 

 

Equity-based compensation

 

 

3,515

 

 

 

2,324

 

 

 

10,155

 

 

 

5,963

 

Amortization of cloud-based software implementation costs

 

 

397

 

 

 

308

 

 

 

1,080

 

 

 

935

 

Deferred lease costs(1)

 

 

(258

)

 

 

108

 

 

 

(1,908

)

 

 

237

 

Impairment and loss on disposal of assets

 

 

592

 

 

 

535

 

 

 

1,697

 

 

 

1,262

 

Legal matters

 

 

 

 

 

 

 

 

6,750

 

 

 

619

 

Gift card breakage cumulative catch-up adjustment

 

 

 

 

 

 

 

 

(1,281

)

 

 

 

Debt offering related costs(2)

 

 

 

 

 

 

 

 

 

 

 

236

 

Executive transition costs

 

 

 

 

 

 

 

 

 

 

 

179

 

Adjusted EBITDA

 

$

19,549

 

 

$

15,830

 

 

$

51,233

 

 

$

43,609

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA margin(3)

 

 

8.6

%

 

 

8.2

%

 

 

7.7

%

 

 

8.1

%

___________________

(1)

 

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

(2)

 

Costs incurred in connection with the Company’s Convertible Notes, issued in March 2021, including consulting and advisory fees.

(3)

 

Calculated as a percentage of Total revenue, which was $227.8 million and $662.0 million for the thirteen and thirty-nine weeks ended September 28, 2022, respectively, and $193.9 million and $536.6 million for the thirteen and thirty-nine weeks ended September 29, 2021, respectively.

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

Adjusted pro forma net income (loss) represents 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 the Company does not believe are directly related to its core operations and may not be indicative of 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 the Company believes are useful measures to evaluate performance period over period and relative to its competitors. By assuming the full exchange of all outstanding LLC Interests, the Company believes these measures facilitate comparisons with other companies that have different organizational and tax structures, as well as comparisons period over period because it eliminates the effect of any changes in Net income (loss) attributable to Shake Shack Inc. driven by increases in its ownership of SSE Holdings, which are unrelated to the Company's operating performance, and excludes items that are non-recurring or may not be indicative of 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 income (loss) and earnings (loss) per share, as determined under GAAP. While these measures are useful in evaluating the Company's 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 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 GAAP financial results. A reconciliation of adjusted pro forma net income (loss) to Net income (loss) attributable to Shake Shack Inc., the most directly comparable GAAP measure, and the computation of adjusted pro forma earnings (loss) per fully exchanged and diluted share are set forth below.

 

 

Thirteen Weeks Ended

 

Thirty-Nine Weeks Ended

(in thousands, except per share amounts)

 

September 28

2022

 

September 29

2021

 

September 28

2022

 

September 29

2021

Numerator:

 

 

 

 

 

 

 

 

Net income (loss) attributable to Shake Shack Inc.

 

$

(2,024

)

 

$

(2,178

)

 

$

(13,374

)

 

$

1,075

 

Adjustments:

 

 

 

 

 

 

 

 

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

 

 

(287

)

 

 

(224

)

 

 

(1,522

)

 

 

(837

)

Legal matters

 

 

 

 

 

 

 

 

6,750

 

 

 

619

 

Gift card breakage cumulative catch-up adjustment

 

 

 

 

 

 

 

 

(1,281

)

 

 

 

Debt offering related costs(2)

 

 

 

 

 

 

 

 

 

 

 

236

 

Executive transition costs

 

 

 

 

 

 

 

 

 

 

 

179

 

Revolving Credit Facility amendments related costs(3)

 

 

 

 

 

 

 

 

 

 

 

323

 

Impact to income tax expense (benefit)(4)

 

 

(11

)

 

 

392

 

 

 

(922

)

 

 

528

 

Adjusted pro forma net income (loss)

 

$

(2,322

)

 

$

(2,010

)

 

$

(10,349

)

 

$

2,123

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

Weighted average shares of Class A common stock outstanding—diluted

 

 

39,274

 

 

 

39,137

 

 

 

39,221

 

 

 

43,448

 

Adjustments:

 

 

 

 

 

 

 

 

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

 

 

2,871

 

 

 

2,922

 

 

 

2,899

 

 

 

 

Adjusted pro forma fully exchanged weighted average shares of Class A common stock outstanding—diluted

 

 

42,145

 

 

 

42,059

 

 

 

42,120

 

 

 

43,448

 

 

 

 

 

 

 

 

 

 

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

 

$

(0.06

)

 

$

(0.05

)

 

$

(0.25

)

 

$

0.05

 

 

 

Thirteen Weeks Ended

 

Thirty-Nine Weeks Ended

 

 

September 28

2022

 

September 29

2021

 

September 28

2022

 

September 29

2021

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

 

$

(0.05

)

 

$

(0.06

)

 

$

(0.34

)

 

$

0.01

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

 

 

 

 

 

 

 

 

(0.01

)

 

 

Non-GAAP adjustments(5)

 

 

(0.01

)

 

 

0.01

 

 

 

0.10

 

 

 

0.04

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

 

$

(0.06

)

 

$

(0.05

)

 

$

(0.25

)

 

$

0.05

___________________

(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.

(2)

 

Costs incurred in connection with the Company’s Convertible Notes, issued in March 2021, including consulting and advisory fees.

(3)

 

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.

(4)

 

Represents the tax effect of the aforementioned adjustments and pro forma adjustments to reflect corporate income taxes at assumed effective tax rates of 39.2% and 28.8% for the thirteen and thirty-nine weeks ended September 28, 2022, respectively, and 32.5% and 123.4% for the thirteen and thirty-nine weeks ended September 29, 2021, 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.

(5)

 

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 additional information.

 

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