SHAK 8-K
Shake Shack Inc. (SHAK)
8-K
2021-08-05
For: 2021-08-05
View Original
Added on
April 12, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (Commission File Number) | (IRS Employer Identification No.) | ||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
(646 ) 747-7200
(Registrant's telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
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. ☐
Securities registered pursuant to Section 12(b) of the Act
Item 2.02 Results of Operations and Financial Condition.
On August 5, 2021, Shake Shack Inc. (the “Company”) issued a press release announcing its financial results for the fiscal second quarter ended June 30, 2021.
The full text of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
Item 7.01 Regulation FD Disclosure.
On August 5, 2021, the Company provided supplemental financial information to be used in its earnings presentation for the fiscal second quarter ended June 30, 2021 on its website at investor.shakeshack.com. The supplemental financial information is furnished as Exhibit 99.2 to this Current Report on Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit Number | Exhibit Description | |||||||
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 hereunto duly authorized.
Shake Shack Inc. | ||||||||
| (Registrant) | ||||||||
| By: | /s/ Katherine I. Fogertey | |||||||
| Katherine I. Fogertey | ||||||||
| Date: August 5, 2021 | Chief Financial Officer | |||||||
| Exhibit Number | Exhibit Description | |||||||
| 99.1 | Shake Shack Inc. press release dated August 5, 2021 announcing its financial results for the fiscal first quarter ended June 30, 2021. (furnished only) | |||||||
| 99.2 | Supplemental Financial Information dated August 5, 2021 provided by Shake Shack Inc. (furnished only) | |||||||
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document | |||||||
Exhibit 99.1
Shake Shack Announces Second Quarter 2021 Financial Results
–Total Revenue Increased 104.2%, to $187.5 million, Supported by >300% In-Shack Sales Growth, versus Same Period Last Year
–Same-Shack Sales Up 52.7% Compared to Same Period Last Year
–Average Weekly Sales Showed Significant Improvement, at $72,000 in the Second Quarter and $74,000 in Fiscal July,
Supported by Stronger Urban and In-Shack Sales
NEW YORK, NY (Business Wire) — August 5, 2021 — Shake Shack Inc. (“Shake Shack” or the “Company”) (NYSE: SHAK) today reported its financial results for the second quarter ended June 30, 2021, a period that included 13 weeks.
Randy Garutti, Chief Executive Officer of Shake Shack, stated, “We remain on the path towards full sales recovery, with total revenue up over 104% versus the second quarter of 2020. As restrictions relaxed across the country, in-Shack sales rose more than 300% year on year. The resilience of our business can be seen through the ongoing revenue improvement in our hardest hit urban Shacks, while at the same time we retained the strong business we built in our suburban Shacks. Additionally, even as more of our guests came back to meet us in person, we still grew our digital business double digits and retained approximately 80% of the digital sales versus fiscal January 2021, when digital sales peaked. In terms of profitability, Shack level operating margin improved significantly along with sales, however, we do expect margins to moderate in the coming quarters as we make significant investments in our team. Our Shack team members are at the core of all we do and we have committed an additional $10 million in raises, incentives and leadership development over the next year. 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 Shack formats through physical and digital transformation with the objective of delivering a seamless, elevated guest experience."
Financial Highlights for the Second Quarter of 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 EBITDA(2) 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 income(2) 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 30, 2021.
(1)In order to compare like-for-like periods for fiscal 2021, same-Shack sales will compare the 52 weeks from December 31, 2020 through December 29, 2021 to the 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. Refer to the materials included in the Supplemental Financial Information, dated August 5, 2021, for illustrative monthly and quarterly comparative periods.
(2)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), and adjusted pro-forma net income (loss) to Net income (loss) attributable to Shake Shack, Inc., the most directly comparable financial measures presented in accordance with GAAP, are set forth in the schedules accompanying this release. See “Non-GAAP Financial Measures.”
Second Quarter 2021 Review
Total revenue, which includes Shack sales and Licensing revenue, increased 104.2% versus the second quarter of 2020, to $187.5 million in the second quarter of 2021. Shack sales for the second quarter of 2021 were $181.5 million compared to $89.5 million in the second quarter of 2020, reflecting an increase of $92.0 million, or 102.7%, due in part to the opening of 29 net new domestic Company-operated Shacks between June 24, 2020 and June 30, 2021, as well as continued sales recovery across Shack markets.
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. These trends continued in fiscal July as we saw same-Shack sales up 38% compared to the same period last year. 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 the reopening of the Union Station, DC and Grand Central Station, NYC Shacks in late June and early July, respectively. In the Southeast region, notably Texas, same-Shack sales are now above pre-pandemic levels; these markets continue to represent growth opportunities for the 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 July.
During the second quarter of 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 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. Improvement was driven domestically by the return of air travel across airports and gradual lifting of capacity restrictions at major US stadiums; internationally, improvement was seen across the regions where COVID-related restrictions have been eased.
Operating income for the second quarter of 2021 was $3.3 million, or a positive operating margin of 1.8%, compared to Operating loss of $24.1 million, or an operating loss margin of 26.2% for the second quarter of 2020. For the second quarter of 2021, Shack-level operating profit, a non-GAAP measure, was $34.8 million, or 19.2% as a percentage of Shack sales, compared to Shack-level operating profit of $22.6 million, or 15.0% of Shack sales in the first quarter of 2021. This increase versus the first quarter of 2021 was primarily the result of better than expected recovery of in-Shack traffic as well as strong digital retention. A reconciliation of Shack-level operating profit to operating income (loss), the most directly comparable GAAP financial measure, is set forth in the schedules accompanying this release. See “Non-GAAP Financial Measures.”
•General and administrative expenses increased to $20.4 million in the second quarter of 2021 from $14.0 million in the second quarter of 2020. The second quarter of 2021 includes $2.0 million of equity-based compensation and other non-cash items. This increase was primarily due to continued investment across the business, as we are committed to investing in our people, marketing and technology. The investments across these initiatives will help support our recovery and the increase in our new Shack pipeline. As a percentage of total revenue, General and administrative expenses decreased to 10.9% for the second quarter of 2021 from 15.3% in the second quarter of 2020.
Development Highlights
During the second quarter of 2021, the Company opened eight new domestic Company-operated Shacks and ten new licensed Shacks. There were no permanent Shack closures in the second quarter 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 | ||||||||||||
In fiscal July 2021, the Company opened one additional domestic Company-operated Shack.
Fiscal 2021 Outlook
The Company is providing revenue and sales guidance for the third quarter of 2021.
| Current Q3 2021 Outlook | |||||
| Total revenue | $194 million to $200 million | ||||
| Shack sales | $188 million to $193 million | ||||
| Licensing revenue | $6 million to $7 million | ||||
| Same-Shack sales versus 2020 | + mid to high 20s% | ||||
| Shack-level operating profit margin | 15% to 17% | ||||
Given the substantial uncertainty and resulting material economic impact caused by the COVID-19 pandemic, the Company is not providing full guidance for the fiscal year ending December 29, 2021, but is updating full year Shack openings and expense guidance from the ranges provided earlier this year.
| Current 2021 Outlook | |||||
| Domestic Company-operated Shack openings | 35 to 38 | ||||
| Licensed Shack openings (gross) | 20 to 25 | ||||
Total General and administrative expenses(1) | $86 million to $88 million | ||||
| Equity-based compensation | approximately $9 million | ||||
| Depreciation expense | $60 million to $63 million | ||||
| Pre-opening costs | $13 million to $14 million | ||||
(1)Includes approximately $8 million of the approximately $9 million total Equity-based compensation.
Earnings Conference Call
As previously announced, the Company will host a conference call to discuss its second quarter 2021 financial results today at 5:00 p.m. ET.
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 August 12, 2021 by dialing (844) 512-2921 or for international callers by dialing (412) 317-6671; the passcode is 13720728.
The live audio webcast of the conference call will be accessible in the Events & Presentations section on 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.
Definitions
The following definitions apply to these terms as used in this release:
"Shack sales" is defined as the aggregate sales of food, beverages and Shake Shack branded merchandise at domestic Company-operated Shacks and excludes sales from licensed Shacks.
"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 days that Shacks were temporarily closed, the comparative prior period was also adjusted.
"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.
"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 EBITDA margin,” 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, as a percentage of revenue.
"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.
About Shake Shack
Shake Shack is a modern day "roadside" burger stand serving a classic American menu of premium burgers, chicken sandwiches, hot dogs, crinkle cut fries, shakes, frozen custard, beer and wine. With its fresh, simple, high-quality food at a great value, Shake Shack is a fun and lively community gathering place with widespread appeal. Shake Shack’s mission is to Stand for Something Good®, from its premium ingredients and caring hiring practices 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 approximately 220 domestic locations in 32 U.S. States and the District of Columbia and more than 100 international locations including London, Hong Kong, Shanghai, Singapore, Philippines, Mexico, Istanbul, Dubai, Tokyo, Seoul and more.
Media:
Kristyn Clark, Shake Shack
(646) 747-8776
Investor Relations:
Melissa Calandruccio, ICR
Michelle Michalski, ICR
(844) SHACK-04 (844-742-2504)
Forward-Looking Statements
This press release 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, uncertainties and other important factors that may cause actual results to be materially different from the statements made herein. All statements other than statements of historical fact included in this press release are forward-looking statements, including, but not limited to, expected financial outlook and operating performance for fiscal 2021, including guidance for the third quarter and full year 2021, expected Shack openings, expected Same-Shack sales growth, sales opportunities and trends in the Company’s operations. Forward-looking statements discuss the Company's current expectations and projections relating to its 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," "seek," "may," "could," "would," "will," "should," "can," "can have," "likely," the negatives thereof and other similar expressions. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. Some of the factors which could cause results to differ materially from the Company's expectations include the continuing impact of the COVID-19 pandemic, including the potential impact of any COVID-19 variants, the Company's ability to develop and open new Shacks on a timely basis, the Company's management of its digital capabilities and expansion into delivery, and risks relating to the restaurant industry generally. You should evaluate all forward-looking statements made in this press release in the context of the risks and uncertainties disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2020 filed with the Securities and Exchange Commission ("SEC"). All of the Company's SEC filings are available online at www.sec.gov, www.shakeshake.com or upon request from Shake Shack Inc. The forward-looking statements included in this press release are made only as of the date hereof. 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.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
(in thousands, except per share amounts)
| Thirteen Weeks Ended | Twenty-Six Weeks Ended | ||||||||||||||||||||||||||||||||||||||||
| June 30 2021 | June 24 2020 | June 30 2021 | June 24 2020 | ||||||||||||||||||||||||||||||||||||||
| Shack sales | $ | 181,470 | 96.8 | % | $ | 89,519 | 97.5 | % | $ | 332,138 | 96.9 | % | $ | 227,567 | 96.9 | % | |||||||||||||||||||||||||
| Licensing revenue | 5,990 | 3.2 | % | 2,267 | 2.5 | % | 10,604 | 3.1 | % | 7,389 | 3.1 | % | |||||||||||||||||||||||||||||
| TOTAL REVENUE | 187,460 | 100.0 | % | 91,786 | 100.0 | % | 342,742 | 100.0 | % | 234,956 | 100.0 | % | |||||||||||||||||||||||||||||
Shack-level operating expenses(1): | |||||||||||||||||||||||||||||||||||||||||
| Food and paper costs | 54,917 | 30.3 | % | 30,027 | 33.5 | % | 99,547 | 30.0 | % | 69,591 | 30.6 | % | |||||||||||||||||||||||||||||
| Labor and related expenses | 52,631 | 29.0 | % | 30,933 | 34.6 | % | 99,013 | 29.8 | % | 72,699 | 31.9 | % | |||||||||||||||||||||||||||||
| Other operating expenses | 24,275 | 13.4 | % | 14,304 | 16.0 | % | 47,419 | 14.3 | % | 32,083 | 14.1 | % | |||||||||||||||||||||||||||||
| Occupancy and related expenses | 14,876 | 8.2 | % | 12,323 | 13.8 | % | 28,787 | 8.7 | % | 24,881 | 10.9 | % | |||||||||||||||||||||||||||||
| General and administrative expenses | 20,366 | 10.9 | % | 14,017 | 15.3 | % | 39,931 | 11.7 | % | 30,208 | 12.9 | % | |||||||||||||||||||||||||||||
| Depreciation and amortization expense | 14,472 | 7.7 | % | 12,089 | 13.2 | % | 28,198 | 8.2 | % | 23,857 | 10.2 | % | |||||||||||||||||||||||||||||
| 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 | 358 | 0.2 | % | 434 | 0.5 | % | 727 | 0.2 | % | 2,522 | 1.1 | % | |||||||||||||||||||||||||||||
| TOTAL EXPENSES | 184,153 | 98.2 | % | 115,861 | 126.2 | % | 349,456 | 102.0 | % | 259,818 | 110.6 | % | |||||||||||||||||||||||||||||
| OPERATING INCOME (LOSS) | 3,307 | 1.8 | % | (24,075) | (26.2) | % | (6,714) | (2.0) | % | (24,862) | (10.6) | % | |||||||||||||||||||||||||||||
| Other income, net | 108 | 0.1 | % | 394 | 0.4 | % | 139 | — | % | 301 | 0.1 | % | |||||||||||||||||||||||||||||
| Interest expense | (359) | (0.2) | % | (442) | (0.5) | % | (874) | (0.3) | % | (554) | (0.2) | % | |||||||||||||||||||||||||||||
| 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) | 991 | 0.5 | % | (6,092) | (6.6) | % | (10,089) | (2.9) | % | (6,005) | (2.6) | % | |||||||||||||||||||||||||||||
| 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 | 121 | 0.1 | % | (1,820) | (2.0) | % | (613) | (0.2) | % | (1,939) | (0.8) | % | |||||||||||||||||||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO SHAKE SHACK INC. | $ | 1,944 | 1.0 | % | $ | (16,211) | (17.7) | % | $ | 3,253 | 0.9 | % | $ | (17,171) | (7.3) | % | |||||||||||||||||||||||||
| Earnings (loss) per share of Class A common stock: | |||||||||||||||||||||||||||||||||||||||||
| Basic | $ | 0.05 | $ | (0.43) | $ | 0.08 | $ | (0.48) | |||||||||||||||||||||||||||||||||
| Diluted | $ | 0.05 | $ | (0.43) | $ | 0.06 | $ | (0.48) | |||||||||||||||||||||||||||||||||
| Weighted-average shares of Class A common stock outstanding: | |||||||||||||||||||||||||||||||||||||||||
| Basic | 39,114 | 37,309 | 39,031 | 35,876 | |||||||||||||||||||||||||||||||||||||
| Diluted | 43,789 | 37,309 | 43,289 | 35,876 | |||||||||||||||||||||||||||||||||||||
(1)As a percentage of Shack sales.
SHAKE SHACK INC.
SELECTED BALANCE SHEET DATA AND OPERATING DATA
(UNAUDITED)
| (in thousands) | June 30 2021 | December 30 2020 | ||||||||||||
| SELECTED BALANCE SHEET DATA: | ||||||||||||||
| Cash and cash equivalents | $ | 340,103 | $ | 146,873 | ||||||||||
| Marketable securities | $ | 80,105 | $ | 36,887 | ||||||||||
| Total assets | $ | 1,432,267 | $ | 1,145,348 | ||||||||||
| Total liabilities | $ | 988,735 | $ | 710,855 | ||||||||||
| Total equity | $ | 443,532 | $ | 434,493 | ||||||||||
| Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||||||||||||
| (dollar amounts in thousands) | June 30 2021 | June 24 2020 | June 30 2021 | June 24 2020 | ||||||||||||||||||||||
| SELECTED OPERATING DATA: | ||||||||||||||||||||||||||
| Same-Shack sales growth (decline) | 52.7 | % | (49.0) | % | 26.4 | % | (31.3) | % | ||||||||||||||||||
| Shacks in the comparable base | 130 | 95 | 132 | 95 | ||||||||||||||||||||||
Shack system-wide sales(1) | $ | 281,893 | $ | 123,789 | $ | 510,198 | $ | 345,370 | ||||||||||||||||||
| Average weekly sales | ||||||||||||||||||||||||||
| Domestic Company-operated | $ | 72 | $ | 45 | $ | 68 | $ | 55 | ||||||||||||||||||
Shack-level operating profit(2) | $ | 34,771 | $ | 1,932 | $ | 57,372 | $ | 28,313 | ||||||||||||||||||
Shack-level operating profit margin(2) | 19.2 | % | 2.2 | % | 17.3 | % | 12.4 | % | ||||||||||||||||||
Adjusted EBITDA(2) | $ | 20,645 | $ | (8,834) | $ | 27,779 | $ | 5,430 | ||||||||||||||||||
Adjusted EBITDA margin(2) | 11.0 | % | (9.6) | % | 8.1 | % | 2.3 | % | ||||||||||||||||||
| Capital expenditures | $ | 21,554 | $ | 18,478 | $ | 44,709 | $ | 37,637 | ||||||||||||||||||
| Shack counts (at end of period): | ||||||||||||||||||||||||||
| System-wide | 339 | 292 | 339 | 292 | ||||||||||||||||||||||
| Domestic Company-operated | 200 | 171 | 200 | 171 | ||||||||||||||||||||||
| Domestic licensed | 23 | 22 | 23 | 22 | ||||||||||||||||||||||
| International licensed | 116 | 99 | 116 | 99 | ||||||||||||||||||||||
(1) Shack system-wide sales is an operating measure and consists of sales from 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 Shack sales from domestic Company-operated Shacks and 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.
(2) Shack-level operating profit and adjusted EBITDA 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 accompanying this release. See “Non-GAAP Financial Measures.”
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 Operating income (loss), the most directly comparable GAAP financial measure, is set forth below.
| Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||||||||||||
| (dollar amounts in thousands) | June 30 2021 | June 24 2020 | June 30 2021 | June 24 2020 | ||||||||||||||||||||||
| Operating income (loss) | $ | 3,307 | $ | (24,075) | $ | (6,714) | $ | (24,862) | ||||||||||||||||||
| Less: | ||||||||||||||||||||||||||
| Licensing revenue | 5,990 | 2,267 | 10,604 | 7,389 | ||||||||||||||||||||||
| Add: | ||||||||||||||||||||||||||
| General and administrative expenses | 20,366 | 14,017 | 39,931 | 30,208 | ||||||||||||||||||||||
| Depreciation and amortization expense | 14,472 | 12,089 | 28,198 | 23,857 | ||||||||||||||||||||||
| Pre-opening costs | 2,258 | 1,734 | 5,834 | 3,977 | ||||||||||||||||||||||
Impairment and loss on disposal of assets(1) | 358 | 434 | 727 | 2,522 | ||||||||||||||||||||||
| Shack-level operating profit | $ | 34,771 | $ | 1,932 | $ | 57,372 | $ | 28,313 | ||||||||||||||||||
| Total revenue | $ | 187,460 | $ | 91,786 | $ | 342,742 | $ | 234,956 | ||||||||||||||||||
| Less: Licensing revenue | 5,990 | 2,267 | 10,604 | 7,389 | ||||||||||||||||||||||
| Shack sales | $ | 181,470 | $ | 89,519 | $ | 332,138 | $ | 227,567 | ||||||||||||||||||
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.
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 | 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 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.
(5)Expense incurred to establish an accrual related to the settlement of a legal matter.
(6)Represents fees paid in connection with the search and hiring of certain executive and key management positions.
(7)Represents consulting and advisory fees related to the Company's enterprise-wide system upgrade initiative called Project Concrete.
(8)Represents incremental expenses incurred related to an inventory adjustment and certain employee-related expenses.
(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.
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 | Twenty-Six Weeks Ended | ||||||||||||||||||||||||||||
| (in thousands, except per share amounts) | June 30 2021 | June 24 2020 | June 30 2021 | June 24 2020 | |||||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||||||||
| Net income (loss) attributable to Shake Shack Inc. | $ | 1,944 | $ | (16,211) | $ | 3,253 | $ | (17,171) | |||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||
Reallocation of net income attributable to non-controlling interests from the assumed exchange of LLC Interests(1) | 121 | (1,820) | (613) | (1,939) | |||||||||||||||||||||||||
Executive transition costs(2) | 179 | 34 | 179 | 68 | |||||||||||||||||||||||||
Project Concrete(3) | — | 24 | — | (237) | |||||||||||||||||||||||||
Legal settlement(4) | 24 | — | 619 | — | |||||||||||||||||||||||||
Debt offering related costs(5) | — | — | 236 | — | |||||||||||||||||||||||||
Revolving Credit Facility amendments related costs(6) | — | — | 323 | — | |||||||||||||||||||||||||
Income tax (expense) benefit(7) | 112 | (286) | 136 | 1,533 | |||||||||||||||||||||||||
Other(8) | — | — | — | 285 | |||||||||||||||||||||||||
| Adjusted pro forma net income (loss) | $ | 2,380 | $ | (18,259) | $ | 4,133 | $ | (17,461) | |||||||||||||||||||||
| Denominator: | |||||||||||||||||||||||||||||
| Weighted-average shares of Class A common stock outstanding—diluted | 43,789 | 37,309 | 43,289 | 35,876 | |||||||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||
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 | 43,789 | 40,426 | 43,289 | 39,007 | |||||||||||||||||||||||||
| 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 | ||||||||||||||||||||||||||||
| June 30 2021 | June 24 2020 | June 30 2021 | June 24 2020 | ||||||||||||||||||||||||||
| 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) | |||||||||||||||||||||||||
Non-GAAP adjustments(9) | — | (0.01) | 0.04 | 0.04 | |||||||||||||||||||||||||
| 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.
(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)Expense incurred to establish an accrual related to the settlement of a legal matter.
(5)Costs incurred in connection with the Company’s Convertible Notes, issued in March 2021, including consulting and advisory fees.
(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.
(7)Represents the tax effect of the aforementioned adjustments and pro forma adjustments to reflect corporate income taxes at assumed effective tax rates of 27.0% and 167.8% for the thirteen and twenty-six weeks ended June 30, 2021, respectively, and 24.1% and 30.2% for the thirteen and twenty-six weeks ended June 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 ended June 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 additional information.
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan S E C O N D Q U A R T E R E A R N I N G S S U P P L E M E N T A L A U G U S T 5 , 2 0 2 1 1
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan This presentation 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, uncertainties and other important factors that may cause actual results to be materially different from the statements made herein. All statements other than statements of historical fact included in this presentation are forward-looking statements, including, but not limited to, expected financial results and operating performance for fiscal 2021, including guidance for the third quarter of 2021 and the full year of 2021, expected 2021 key financial drivers, expected development targets for fiscal 2021 and fiscal 2022, including expected Shack construction and openings, expected same-Shack sales growth and trends in the Company’s operations, the Company's licensed business, the Company's investment in its employees, the expansion of the Company’s delivery services, the Company’s digital investments and strategies, and statements relating to the effects of COVID-19 and the Company’s mitigation efforts. Forward-looking statements discuss the Company’s current expectations and projections relating to its financial 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," "seek," "may," "could," "would," "will," "should," "can," "can have," "likely," the negatives thereof and other similar expressions. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. Some of the factors which could cause results to differ materially from the Company’s expectations include the impact of the COVID-19 pandemic, our ability to develop and open new Shacks on a timely basis, the management of our digital capabilities and expansion into delivery, and risks relating to the restaurant industry generally. You should evaluate all forward-looking statements made in this presentation in the context of the risks and uncertainties disclosed in our Annual Report on Form 10-K for the fiscal year ended December 30, 2020 as filed with the Securities and Exchange Commission (the "SEC"). All of the Company's SEC filings are available online at www.sec.gov, www.shakeshack.com or upon request from Shake Shack Inc. The forward-looking statements included in this presentation are made only as of the date hereof. 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. CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS 2
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan Q2 2021 RESULTS 1. “Shack 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. 2. "Same-Shack sales" or “SSS” 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 Shacks that were temporarily closed, the comparative prior period was also adjusted. 3. To normalize for the 53rd week in fiscal 2020, the compare periods for both 2020 and 2019 have been shifted forward a week from the fiscal calendar in order to show a more like-for-like comparison. See Financial Details section for more information and 2021 SSS comparative periods. 4. "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. See Financial Details section for definition and reconciliation to most comparable GAAP measure. 5. “Adjusted EBITDA,” a non-GAAP measure, is defined as EBITDA excluding equity-based compensation expense, deferred lease costs, impairment and loss on disposal of assets, amortization of cloud-based software implementation costs, as well s 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. See Financial Details section for definition and reconciliation to most comparable GAAP measure. Total Revenue: $187M +104.2% YoY 3 Shack-level operating profit4: $34.8M 19.2% of Shack sales Shack system-wide sales1: $282M +127.7% YoY Adjusted EBITDA5: $20.6M 11.0% of Total Revenue Same-Shack Sales versus 20202,3: +52.7% (12.4%) decrease in SSS versus 2019
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan Total Revenue $631 Million System-wide Sales $944 Million System-wide Shack Count 339 as of Q2 2021 Cash Flow from Operations $56 Million 1. Average Weekly Sales (“AWS”) 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. 2. Retention of fiscal January 2021 digital sales levels in fiscal June 2021, when digital sales peaked. 3. CAGR for total revenue, system-wide sales, system-wide Shack count and cash flow from operations, is the compounded annual growth rate between 2016 and the end of Q2 2021. $268 $359 $459 $595 $523 $631 2016 2017 2018 2019 2020 Q2 2021 (TTM) $403M $532M $672M $895M $779M $944M 2016 2017 2018 2019 2020 Q2 2021 (TTM) 114 159 208 275 311 339 2016 2017 2018 2019 2020 Q2 2021 $54 $71 $85 $90 $37 $56 2016 2017 2018 2019 2020 Q2 2021 (TTM) 4 Strong New Openings and Development: Class of 2021 AWS $81K and opened 19 Company-operated YTD as of fiscal July. Targeting 35- 38 total openings in 2021, including the first Shack drive thru. Standing Together: Investing $10M in Shack team with wage increases and retention bonuses over next 12 months, while doubling down on team member professional development. In-Shack Come Back: Average weekly sales (AWS)1 improvement, at $72K in Q2, driven by the return of in- Shack sales. Digital sales retention remains high at ~80%2. BUSINESS H IGHLIGHTS
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan FISCAL JULY 2021 SNAPSHOT 1. To normalize for the 53rd week in fiscal 2020, the compare periods for both 2020 and 2019 have been shifted forward a week from the fiscal calendar in order to show a more like-for-like comparison. See Financial Details section for more information and 2021 SSS comparative periods. Building Sales Momentum: $74K Fiscal July AWS, up from $64K in Q1 Urban SSS v 2019 Progress: (18%) Urban fiscal July SSS versus 2019, improvement from (27%) in fiscal April SSS vs 2019 Improvement: (9%) Fiscal July SSS versus 2019, improvement from (15%) in fiscal April 5 Strong New Shack Sales: $81K Fiscal July Class of 2021 AWS; ~20% higher than rest of Company-operated Shacks SSS vs 2020 Recovery: 38% Increase in fiscal July SSS versus 20201
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan Announced an additional investment of more than $9M in Shack team member wage increases, following the raises provided earlier this year. Also providing $1M in hiring and retention bonuses. Shake Shack is proud to offer equity grants for General Managers, allowing them to grow with the company. Leadership development programs train team members for internal promotions and build our pipeline for growth. INVESTING ADD’L $10M IN SHACK TEAM OVER NEXT 12 MONTHS W E A R E F O C U S E D O N R E TA I N I N G A N D D E V E L O P I N G O U R C U R R E N T A N D F U T U R E E M P L O Y E E S 6
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan $45K $58K $62K $64K $69K $71K $74K $74K AWS Third Quarter 2020 Fourth Quarter 20201 1. Fourth Quarter 2020 total YoY Shack sales decline excludes impact of the 53rd fiscal accounting week and compares the thirteen weeks from September 24, 2020 through December 23, 2020 to the thirteen weeks from September 26, 2019 through December 25, 2019. The favorable impact of the 53rd week in fiscal 2020 was an incremental Shack sales of $10.7 million. (17%) (3%) 9%Total YoY Shack Sales Growth / (Decline) First Quarter 2021 Second Quarter 2020 (39%) AVERAGE WEEKLY SALES RECOVERY CONTINUES H I G H L E V E L S D R I V E N P R E D O M I N AT E LY B Y I N - S H A C K S A L E S > 3 0 0 % I N Q 2 2 0 2 1 V E R S U S 2 0 2 0 7 171% Fiscal April 2021 85% Fiscal May 2021 82% Fiscal June 2021 62% Fiscal July 2021 Q2 AWS $72K
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan 1. Urban refers to a Shack that is located in a very densely populated city area. These locations tend to be very walkable, close to lots of traffic, shopping, tourism and/or office buildings. Suburban is any Shack that is not classified as urban. 2. To normalize for the 53rd week in fiscal 2020, the compare periods for both 2020 and 2019 have been shifted forward a week from the fiscal calendar in order to show a more like-for-like comparison. See Financial Details section for more information and 2021 SSS comparative periods. 3. For Q4 2020, same-Shack sales excludes the impact of the fourteenth week and compares the thirteen weeks from September 24, 2020 through December 23, 2020 to the thirteen weeks from September 26, 2019 through December 25, 2019. ONGOING URBAN RECOVERY DRIV ING COMPANY IMPROVEMENT S U B U R B A N H O L D I N G S T E A D Y AT 2 0 1 9 L E V E L S (57%) (43%) (31%) 48% (38%) (16%) (0%) 30% (49%) (32%) (17%) 38% (25%) (27%) (23%) (19%) (18%) (4%) (1%) 1% (1%) 1% (15%) (15%) (12%) (11%) (9%) Second Quarter 2020 Third Quarter 2020 Fourth Quarter 2020 First Quarter 2021 Fiscal April 2021 Fiscal May 2021 Fiscal June 2021 Fiscal July 2021 Urban SSS%Suburban SSS% URBAN/SUBURBAN1 SAME-SHACK SALES VS PRIOR YEAR AND 20192 Total SSS% 3 8 Dotted lines represent 2021 SSS % vs 2019
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan BROAD BASED SAME SHACK SALES IMPROVEMENT ACROSS ALL REGIONS, LED BY NYC RECOVERY 1. The regions of domestic Company-operated Shacks are defined as: NYC, which represents 5 boroughs; Northeast, which represents non-NYC NY, CT, DC, DE, MA, MD, NJ, PA, RI, VA; Southeast, which represents AL, FL, GA, LA, NC, TN, TX; Midwest, which represents IL, KS, KY, MI, MN, MO, OH, WI; and West, which represents AZ, CA, CO, NV, UT, WA. 2. "Same-Shack sales" or “SSS” 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 days that Shacks were temporarily closed, the comparative year period was also adjusted. 3. To normalize for the 53rd week in fiscal 2020, the compare periods for both 2020 and 2019 have been shifted forward a week from the fiscal calendar in order to show a more like-for-like comparison. See Financial Details section for more information and 2021 SSS comparative periods. 4. For Q4 2020, same-Shack sales excludes the impact of the fourteenth week and compares the thirteen weeks from September 24, 2020 through December 23, 2020 to the thirteen weeks from September 26, 2019 through December 25, 2019. REGIONAL1 SAME-SHACK SALES 2 VS PRIOR YEAR3 (64%) 51% (69%) 68% (41%) 25% (41%) 53% (47%) 48% (45%) 30% Second Quarter 2020 Third Quarter 2020 Fourth Quarter 2020 First Quarter 2021 Fiscal April 2021 Fiscal May 2021 Fiscal June 2021 Fiscal July 2021 Northeast Southeast West Midwest NYC (incl. Manhattan) Manhattan 4 9 Fiscal April 2021 vs 2019 Fiscal July 2021 vs 2019 2% 4% (9%) (5%) (11%) (8%) (17%) (9%) (35%) (26%) (44%) (33%)
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan 1. Retention of fiscal January 2021 digital sales levels in fiscal June 2021, when digital sales peaked. 2. Digital sales includes sales made through the Shake Shack mobile application, Shake Shack website, and delivery partners. Does not include sales through Kiosks that are located inside Shacks. Digital sales are normalized to reflect a consistent four-week period. RETAINED ~80% OF D IGITAL SALES AS IN -SHACK RECOVERS 1 , 2 ~ 1 7 % I N C R E A S E O F N E W P U R C H A S E R S I N C O M PA N Y - O W N E D A P P & W E B C H A N N E L S Q o Q , 2 . 8 M T O TA L P U R C H A S E R S A C Q U I R E D S I N C E M A R C H 2 0 2 0 78% 81% 68% 62% 60% 59% 58% 60% 60% 64% 62% 54% 51% 48% 42% 40% Fiscal April 2020 Fiscal May 2020 Fiscal June 2020 Fiscal July 2020 Fiscal August 2020 Fiscal September 2020 Fiscal October 2020 Fiscal November 2020 Fiscal December 2020 Fiscal January 2021 Fiscal February 2021 Fiscal March 2021 Fiscal April 2021 Fiscal May 2021 Fiscal June 2021 Fiscal July 2021 % Indicates digital mix of sales In-Shack Sales $ Digital Sales $ Q3 Digital Mix 60% Q4 Digital Mix 59% Q2 Digital Mix 75% 10 Q1 Digital Mix 60% Q2 Digital Mix 47%
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan CLASS OF 2021 OPENINGS: AWS ~20% > REST OF COMPANY 1 9 S H A C K S O P E N E D A S O F F I S C A L J U LY, 3 5 - 3 8 S H A C K S T O TA L I N 2 0 2 1 ; 4 5 - 5 0 O P E N I N G 2 0 2 2 11 New Shacks will incorporate elements of Shack Track digital experience, delivering greater guest convenience. Fishers, IN, our second Shack Track drive-up window currently serving ~20% of sales. About a third of class of 2021 new Shacks will have Shack Track walk-up windows and 10% will have drive-up windows.
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan TARGETING 10 DRIVE THRU OPENINGS THROUGH 2022 D Y N A M I C D E S I G N S W I L L E L E VAT E T H E D R I V E T H R U G U E S T E X P E R I E N C E A N D P R O V I D E C O N V E N I E N C E First drive thru opening in 2021; milestone in multi-format evolution Drive thrus incorporate enlightened hospitality through branded digital features 12
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan $2.7M $5.3M $6.1M $6.0M $6.6M $7.7M $8.6M $8.7M Licensed Weekly Sales 1. Licensed weekly sales is an operating measure and consists of sales from 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. 2. Fourth Quarter 2020 total YoY licensed sales decline excludes impact of the 53rd fiscal accounting week. The favorable impact of the 53rd week in fiscal 2020 was an incremental licensed sales of $7.0 million. 13 L ICENSED BUSINESS STRENGTHENED IN Q2 D O M E S T I C T R AV E L , S TA D I U M V E N U E R E O P E N I N G S A N D C E R TA I N I N T E R N AT I O N A L M A R K E T S D R O V E I M P R O V E M E N T S , W H I L E C O V I D - I M PA C T E D G L O B A L M A R K E T S R E M A I N V O L AT I L E Fourth Quarter 20202 Second Quarter 2020 Fiscal April 2021 Fiscal May 2021 Fiscal June 2021 Total YoY Licensed Sales Growth / (Decline) (55%) (20%) (11%) (6%) 233% 227% 144% Third Quarter 2020 First Quarter 2021 Fiscal July 2021 86% 1
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan 15 Shacks opened through fiscal July, 20-251 total expected for fiscal 2021. One permanently closed and 10 remain temporarily closed through fiscal July primarily due to COVID. 20-25 Shacks targeted in 2022 in new and existing markets, including Shack Track formats. Strong class of 2021; opening of first Shack in Shenzhen saw one of the highest opening week sales across all system- wide Shacks. Expanded development agreement with partners in China to grow footprint over next 10 years; including more Shacks in South China and entry into Central China. L ICENSED BUSINESS GLOBAL FOOTPRINT EXPANSION 14 1. 2021-2022 expected Shack openings is gross and does not include closures.
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan FOCUS ON CULINARY INNOVATION LT O C A L E N D A R F E AT U R E S C H I C K E N A N D S E A S O N A L L E M O N A D E S . L I F T I N AV E R A G E I N - S H A C K C H E C K I N Q 2 V E R S U S Q 1 D R I V E N B Y P O P U L A R B E V E R A G E O F F E R I N G S 1515
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan 2021 OUTLOOK 1. Includes approximately $8M of the approximately $9M total Equity-based compensation. These forward-looking projections are subject to known and unknown risks, uncertainties and other important factors that may cause actual results to be materially different from these projections. Factors that may cause such differences include those discussed in the Company's Form 10-K for the fiscal year ended December 30, 2020 and our Cautionary Note On Forward-Looking Statements herein. These forward-looking projections should be reviewed in conjunction with the condensed consolidated financial statements and the section titled “Cautionary Note Regarding Forward-Looking Information” which form the basis of our assumptions used to prepare these forward-looking projections. You should not attribute undue certainty to these projections, and we undertake no obligation to revise or update any forward-looking information, except as required by law. Total revenue Shack sales Licensed revenue Same-Shack sales versus 2020 Shack-level operating profit margin Domestic Company-operated openings Licensed openings (gross) General and administrative expenses Equity-based compensation Depreciation expense Pre-opening costs $194M to $200M $188M to $193M $6M to $7M + mid to high 20s% 15% to 17% 35 to 38 20 to 25 $86M to $88M1 Approximately $9M $60M to $63M $13M to $14M Q3 and full year 2021 guidance is derived from recent trends and does not assume material changes to the current operating environment, inclusive of any potential further COVID impacts Q3 2021 Guidance FY 2021 Guidance 16
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan MARGIN PRESSURES INCLUDING LABOR INVESTMENTS EXPECTED IN Q3 C O M M I T T E D T O S U P P O R T T E A M M E M B E R R E T E N T I O N A N D D E V E L O P M E N T 17 2.2% 14.8% 16.0% 15.0% 19.2% 15% 17% Second Quarter 2020 Third Quarter 2020 Fourth Quarter 2020 First Quarter 2021 Second Quarter 2021 Labor & Other Impacts Third Quarter 2021 Guidance High Low Anticipated impact of investments in team wages and training as well as resumption of select costs as guests come back to dining rooms
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan Board of Direct rs M eting 1 20 FINANCIAL DETAILS
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan 2021 METHODOLOGY FOR SAME-SHACK SALES CALCULATION 19 Notes Fiscal Calendar Comparisons Reason for Shifted Weeks: Given the 53rd fiscal week in 2020 the comparison periods for 2021 Same-Shack Sales have been shifted one week forward in both 2019 & 2020 to ensure comparable dates and key holidays fall in similar weeks and, therefore, create a more aligned year-over-year compare How to Read the Fiscal Calendar Comparisons: Fiscal periods are color coded to show comparison weeks from the prior two years For example: P1 W1 2021 (beginning 12/31/20) is compared to P1 W2 2020 (beginning 1/2/20)
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan INCOME STATEMENT 20 (1) As a percentage of Shack sales. Shack sales $ 181,470 96.8% $ 89,519 97.5% $ 332,138 96.9% $ 227,567 96.9% Licensing revenue 5,990 3.2% 2,267 2.5% 10,604 3.1% 7,389 3.1% TOTAL REVENUE 187,460 100.0% 91,786 100.0% 342,742 100.0% 234,956 100.0% Shack-level operating expenses(1): Food and paper costs 54,917 30.3% 30,027 33.5% 99,547 30.0% 69,591 30.6% Labor and related expenses 52,631 29.0% 30,933 34.6% 99,013 29.8% 72,699 31.9% Other operating expenses 24,275 13.4% 14,304 16.0% 47,419 14.3% 32,083 14.1% Occupancy and related expenses 14,876 8.2% 12,323 13.8% 28,787 8.7% 24,881 10.9% General and administrative expenses 20,366 10.9% 14,017 15.3% 39,931 11.7% 30,208 12.9% Depreciation and amortization expense 14,472 7.7% 12,089 13.2% 28,198 8.2% 23,857 10.2% 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 358 0.2% 434 0.5% 727 0.2% 2,522 1.1% TOTAL EXPENSES 184,153 98.2% 115,861 126.2% 349,456 102.0% 259,818 110.6% OPERATING INCOME (LOSS) 3,307 1.8% (24,075) (26.2)% (6,714) (2.0)% (24,862) (10.6)% Other income, net 108 0.1% 394 0.4% 139 0.0% 301 0.1% Interest expense (359) (0.2)% (442) (0.5)% (874) (0.3)% (554) (0.2)% 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) 991 0.5% (6,092) (6.6)% (10,089) (2.9)% (6,005) (2.6)% 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 121 0.1% (1,820) (2.0)% (613) (0.2)% (1,939) (0.8)% NET INCOME (LOSS) ATTRIBUTABLE TO SHAKE SHACK INC. $ 1,944 1.0% $ (16,211) (17.7)% $ 3,253 0.9% $ (17,171) (7.3)% Earnings (loss) per share of Class A common stock: Basic $ 0.05 $ (0.43) $ 0.08 $ (0.48) Diluted $ 0.05 $ (0.43) $ 0.06 $ (0.48) Weighted-average shares of Class A common stock outstanding: Basic 39,114 37,309 39,031 35,876 Diluted 43,789 37,309 43,289 35,876 Thirteen Weeks Ended June 30, 2021 June 24, 2020 Twenty-Six Weeks Ended June 30, 2021 June 24, 2020
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan 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. "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. 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 operating income, the most directly comparable GAAP financial measure, is set forth on next slide. SHACK-LEVEL OPERATING PROFIT DEFIN IT IONS 21
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan (dollar amount in thousands) June 30, 2021 June 24, 2020 June 30, 2021 June 24, 2020 Operating income (loss) 3,307$ (24,075)$ (6,714)$ (24,862)$ Less: Licensing revenue 5,990 2,267 10,604 7,389 Add: - - - - General and administrative expenses 20,366 14,017 39,931 30,208 Depreciation and amortization expense 14,472 12,089 28,198 23,857 Pre-opening costs 2,258 1,734 5,834 3,977 Impairment and loss on disposal of assets(1) 358 434 727 2,522 Shack-level operating profit 34,771$ 1,932$ 57,372$ 28,313$ Total revenue 187,460$ 91,786$ 342,742$ 234,956$ Less: licensing revenue 5,990 2,267 10,604 7,389 Shack sales 181,470$ 89,519$ 332,138$ 227,567$ Shack-level operating profit margin(2) 19.2% 2.2% 17.3% 12.4% Thirteen Weeks Ended Twenty-Six Weeks Ended SHACK-LEVEL OPERATING PROFIT 22 (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.
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan 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 cost, 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 EBITDA margin,” a non-GAAP measure, is defined as net income (loss) before interest expense (net of interest income), taxes, depreciation and amortization, which also excludes equity-based compensation expense, deferred lease costs, impairment and loss on disposal of assets, amortization of cloud- based software implementation assets, as well as certain non-recurring and other items that the Company does not believe directly reflect its core operations, as a percentage of revenue. ADJUSTED EBITDA DEFIN IT IONS 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, the most directly comparable GAAP measure, is set forth on next slide. 23
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan (1) (2) (3) (4) (5) (6) (7) (8) (9) Represents fees paid in connection with the search and hiring of certain executive and key management positions. Represents consulting and advisory fees related to the Company's enterprise-wide system upgrade initiative called Project Concrete. Represents incremental expenses incurred related to an inventory adjustment and certain employee- related expenses. 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. Represents amortization of capitalized implementation costs related to cloud-based software arrangements that are included within General and Administrative expenses. Reflects the extent to which lease expense is greater than or less than contractual fixed base rent. 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 $1.1 million related to one Shack. Costs incurred in connection with the Company’s Convertible Notes, issued in March 2021, including consulting and advisory fees. Expense incurred to establish an accrual related to the settlement of a legal matter. (dollar amounts in thousands) June 30, 2021 June 24, 2020 June 30, 2021 June 24, 2020 Net income (loss) 2,065$ (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% Twenty-Six Weeks EndedThirteen Weeks Ended 24 ADJUSTED EBITDA
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan Adjusted Pro Forma Effective Tax Rate Adjusted pro forma effective tax rate represents the effective tax rate 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 its recurring business operations. How This Measure Is Useful When used in conjunction with GAAP financial measures, adjusted pro forma effective tax rate is a supplemental measure of operating performance that the Company believes is useful to evaluate its performance period over period and relative to its competitors. By assuming the full exchange of all outstanding LLC Interests, the Company believes this measure facilitates 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 effective tax rate 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. ADJUSTED PRO FORMA EFFECTIVE TAX RATE DEFIN IT IONS Limitations of the Usefulness of this Measure Adjusted pro forma effective tax rate may differ from similarly titled measures used by other companies due to different methods of calculation. Presentation of adjusted pro forma effective tax rate should not be considered an alternative to effective tax rate, as determined under GAAP. While this measure is useful in evaluating the Company's performance, it does not account for the effective tax rate attributable to the non-controlling interest holders and therefore does not provide a complete understanding of effective tax rate. Adjusted pro forma effective tax rate should be evaluated in conjunction with GAAP financial results. A reconciliation of adjusted pro forma effective tax rate, the most directly comparable GAAP measure, is set forth on next slide. 25
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan 2021 ADJUSTED PRO FORMA EFFECTIVE TAX RATE 26 (dollar amounts in thousands) Income Tax Expense (Benefit) Income (Loss) Before Income Taxes Effective Tax Rate Income Tax Expense Income Before Income Taxes Effective Tax Rate As reported 991$ 3,056$ 32.4% (10,089)$ (7,449)$ 135.4% Non-GAAP adjustments (before tax): Debt offering related costs - - 236 Revolving Credit Facility amendment-related costs - - 323 Legal settlement 24 - 619 Executive transition costs 179 - 179 Tax effect of non-GAAP adjustments and assumed exchange of outstanding LLC Interests (112) (136) - Adjusted pro forma 879$ 3,259$ 27.0% (10,225)$ (6,092)$ 167.8% Less: Net tax impact from stock-based compensation 121 8,472 - Adjusted pro forma (excluding windfall tax benefits) 1,000 3,259$ 30.7% (1,753)$ (6,092)$ 28.8% Thirteen Weeks Ended Fiscal Year Ended June 30, 2021 June 30, 2021
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan 2020 ADJUSTED PRO FORMA EFFECTIVE TAX RATE 27 (dollar amounts in thousands) Income Tax Expense (Benefit) Income (Loss) Before Income Taxes Effective Tax Rate Income Tax Expense Income Before Income Taxes Effective Tax Rate As reported (6,092)$ (24,123)$ 25.3% (6,005)$ (25,115)$ 23.9% Non-GAAP adjustments (before tax): Executive transition costs 34 - 68 Project Concrete 24 - (237) Inventory adjustment and certain employee-related expenses - 285 Tax effect of non-GAAP adjustments and assumed exchange of outstanding LLC Interests 286 (1,533) - Adjusted pro forma (5,806)$ (24,065)$ 24.1% (7,538)$ (24,999)$ 30.2% Less: Windfall tax benefits from stock-based compensation (876) 593 Adjusted pro forma (excluding windfall tax benefits) (6,682)$ (24,065)$ 27.8% (6,945)$ (24,999)$ 27.8% Thirteen Weeks Ended Fiscal Year Ended June 24, 2020 June 24, 2020
Meeting of the Board of Directors | Q4 2019 2020 Strategic Plan CONTACT INFORMATION INVESTOR CONTACT Melissa Calandruccio, ICR Michelle Michalski, ICR (844) Shack-04 (844-742-2504) [email protected] MEDIA CONTACT Kristyn Clark, Shake Shack [email protected]