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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ______
Commission file number: 001-36823
shak-20220928_g1.jpg
SHAKE SHACK INC.
(Exact name of registrant as specified in its charter)
Delaware47-1941186
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
225 Varick Street
Suite 301
New York,New York10014
(Address of principal executive offices)(Zip Code)
(646) 747-7200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act
Title of each class Trading symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.001SHAKNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule-405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þ Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated filer  
Non-accelerated filer  Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
As of October 26, 2022, there were 39,279,939 shares of Class A common stock outstanding and 2,869,513 shares of Class B common stock outstanding.



SHAKE SHACK INC.
TABLE OF CONTENTS



Cautionary Note Regarding Forward-Looking Information
This Quarterly Report on Form 10-Q ("Form 10-Q") contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"), which are subject to known and unknown risks, 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 Form 10-Q are forward-looking statements, including, but not limited to, statements about our growth, strategic plan, and our liquidity. Forward-looking statements discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "aim," "anticipate," "believe," "estimate," "expect," "forecast," "future," "intend," "outlook," "potential," "project," "projection," "plan," "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, increased costs or shortages or interruptions in the supply and delivery of our products, increased labor costs or shortages, inflationary pressures, the Company's management of its digital capabilities and expansion into new channels, including drive-thru, our ability to maintain and grow sales at our existing Shacks, and risks relating to the restaurant industry generally. You should evaluate all forward-looking statements made in this Form 10-Q in the context of the risks and uncertainties disclosed in our Annual Report on Form 10-K for the fiscal year ended December 29, 2021 as filed with the Securities and Exchange Commission (the "SEC").
The forward-looking statements included in this Form 10-Q 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. shak-20220928_g2.jpg Form 10-Q | 1

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
2 | Shake Shack Inc. shak-20220928_g2.jpg Form 10-Q

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 securities80,015 80,000 
Accounts receivable, net11,800 13,657 
Inventories3,996 3,850 
Prepaid expenses and other current assets14,246 9,763 
Total current assets367,055 409,676 
Property and equipment, net of accumulated depreciation of $271,938 and $222,768, respectively
441,870 389,386 
Operating lease assets370,536 347,277 
Deferred income taxes, net306,976 298,668 
Other assets15,330 12,563 
TOTAL ASSETS$1,501,767 $1,457,570 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$17,210 $19,947 
Accrued expenses49,387 36,892 
Accrued wages and related liabilities17,758 14,638 
Operating lease liabilities, current40,690 35,519 
Other current liabilities19,497 14,501 
Total current liabilities144,542 121,497 
Long-term debt244,328 243,542 
Long-term operating lease liabilities429,165 400,113 
Liabilities under tax receivable agreement, net of current portion234,892 234,045 
Other long-term liabilities20,588 22,773 
Total liabilities1,073,515 1,021,970 
Commitments and contingencies (Note 13)
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 capital413,274 405,940 
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 interests24,757 26,063 
Total equity428,252 435,600 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$1,501,767 $1,457,570 
See accompanying Notes to Condensed Consolidated Financial Statements.
Shake Shack Inc. shak-20220928_g2.jpg Form 10-Q | 3

SHAKE SHACK INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
(in thousands, except per share amounts)
Thirteen Weeks EndedThirty-Nine Weeks Ended
September 28
2022
September 29
2021
September 28
2022
September 29
2021
Shack sales$219,501 $186,972 $639,346 $519,110 
Licensing revenue8,313 6,923 22,611 17,527 
TOTAL REVENUE227,814 193,895 661,957 536,637 
Shack-level operating expenses:
Food and paper costs67,774 57,925 193,645 157,472 
Labor and related expenses64,638 58,208 190,954 157,221 
Other operating expenses33,966 26,613 96,766 74,032 
Occupancy and related expenses17,337 14,640 50,270 43,427 
General and administrative expenses26,645 20,504 87,040 60,435 
Depreciation and amortization expense18,647 15,183 53,589 43,381 
Pre-opening costs3,041 2,933 8,576 8,767 
Impairment and loss on disposal of assets592 535 1,697 1,262 
TOTAL EXPENSES232,640 196,541 682,537 545,997 
LOSS FROM OPERATIONS(4,826)(2,646)(20,580)(9,360)
Other income, net1,482 18 1,731 157 
Interest expense(475)(350)(1,145)(1,224)
LOSS BEFORE INCOME TAXES(3,819)(2,978)(19,994)(10,427)
Benefit from income taxes(1,508)(576)(5,098)(10,665)
NET INCOME (LOSS)(2,311)(2,402)(14,896)238 
Less: Net loss attributable to non-controlling interests(287)(224)(1,522)(837)
NET INCOME (LOSS) ATTRIBUTABLE TO SHAKE SHACK INC.$(2,024)$(2,178)$(13,374)$1,075 
Earnings (loss) per share of Class A common stock:
Basic$(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:
Basic39,274 39,137 39,221 39,066 
Diluted39,274 39,137 39,221 43,448 
See accompanying Notes to Condensed Consolidated Financial Statements.



4 | Shake Shack Inc. shak-20220928_g2.jpg Form 10-Q

SHAKE SHACK INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(in thousands)
Thirteen Weeks EndedThirty-Nine Weeks Ended
September 28
2022
September 29
2021
September 28
2022
September 29
2021
Net income (loss)$(2,311)$(2,402)$(14,896)$238 
Other comprehensive income (loss), net of tax(1):
Change in foreign currency translation adjustment (1)(2)(2)
Net change (1)(2)(2)
OTHER COMPREHENSIVE INCOME (LOSS) (1)(2)(2)
COMPREHENSIVE INCOME (LOSS)(2,311)(2,403)(14,898)236 
Less: Comprehensive loss attributable to non-controlling interests(287)(224)(1,522)(837)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO SHAKE SHACK INC.$(2,024)$(2,179)$(13,376)$1,073 
(1)Net of tax expense of $0 for the thirteen and thirty-nine weeks ended September 28, 2022 and September 29, 2021.
See accompanying Notes to Condensed Consolidated Financial Statements.
Shake Shack Inc. shak-20220928_g2.jpg Form 10-Q | 5

SHAKE SHACK INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(in thousands, except share amounts)
For the Thirteen Weeks Ended September 28, 2022 and September 29, 2021
Class A
Common Stock
Class B
Common Stock
Additional
Paid-In
Capital
Retained Earnings (Accumulated Deficit)Accumulated Other Comprehensive Income (Loss)Non-
Controlling
Interest
Total
Equity
SharesAmountSharesAmount
BALANCE, JUNE 29, 202239,266,670 $39 2,871,513 $3 $410,520 $(7,796)$(1)$24,871 $427,636 
Net income (loss)(2,024)(287)(2,311)
Other comprehensive income (loss):
Net change in foreign currency translation adjustment  
Equity-based compensation3,570 3,570 
Activity under stock compensation plans11,029 (182)245 63 
Redemption of LLC Interests2,000 (2,000)7 (7) 
Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis(641)(641)
Distributions paid to non-controlling interest holders(65)(65)
BALANCE, SEPTEMBER 28, 202239,279,699 $39 2,869,513 $3 $413,274 $(9,820)$(1)$24,757 $428,252 
BALANCE, JUNE 30, 202139,134,356 $39 2,921,587 $3 $401,567 $15,462 $2 $26,459 $443,532 
Net income (loss)(2,178)(224)(2,402)
Other comprehensive income (loss):
Net change in foreign currency translation adjustment(1)(1)
Equity-based compensation2,354 2,354 
Activity under stock compensation plans5,023 (386)354 (32)
Redemption of LLC Interests— — — — — 
Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis— — — 
Distributions paid to non-controlling interest holders(172)(172)
BALANCE, SEPTEMBER 29, 202139,139,379 $39 2,921,587 $3 $403,535 $13,284 $1 $26,417 $443,279 

6 | Shake Shack Inc. shak-20220928_g2.jpg Form 10-Q

For the Thirty-Nine Weeks Ended September 28, 2022 and September 29, 2021
Class A
Common Stock
Class B
Common Stock
Additional
Paid-In
Capital
Retained Earnings (Accumulated Deficit)Accumulated Other Comprehensive Income (Loss)Non-
Controlling
Interest
Total
Equity
SharesAmountSharesAmount
BALANCE, DECEMBER 29, 202139,142,397 $39 2,921,587 $3 $405,940 $3,554 $1 $26,063 $435,600 
Net income (loss)(13,374)(1,522)(14,896)
Other comprehensive income (loss):
Net change in foreign currency translation adjustment(2)(2)
Equity-based compensation10,295 10,295 
Activity under stock compensation plans85,228 (2,790)918 (1,872)
Redemption of LLC Interests52,074 (52,074)313 (313) 
Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis(484)(484)
Distributions paid to non-controlling interest holders(389)(389)
BALANCE, SEPTEMBER 28, 202239,279,699 $39 2,869,513 $3 $413,274 $(9,820)$(1)$24,757 $428,252 
BALANCE, DECEMBER 30, 202038,717,790 $39 2,951,188 $3 $395,067 $12,209 $3 $27,172 $434,493 
Net income (loss)1,075 (837)238 
Other comprehensive income (loss):
Net change in foreign currency translation adjustment(2)(2)
Equity-based compensation6,037 6,037 
Activity under stock compensation plans391,988 2,185 993 3,178 
Redemption of LLC Interests29,601 (29,601)33 (33) 
Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis213 213 
Distributions paid to non-controlling interest holders(878)(878)
BALANCE, SEPTEMBER 29, 202139,139,379 $39 2,921,587 $3 $403,535 $13,284 $1 $26,417 $443,279 
See accompanying Notes to Condensed Consolidated Financial Statements.

Shake Shack Inc. shak-20220928_g2.jpg Form 10-Q | 7

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 expense53,589 43,381 
Amortization of debt issuance costs786 605 
Amortization of cloud computing asset1,080 935 
Non-cash operating lease cost43,159 37,213 
Equity-based compensation10,155 5,963 
Deferred income taxes12,215 9,708 
Loss on sale of marketable securities 5 
Non-cash interest expense181 348 
Impairment and loss on disposal of assets1,697 1,262 
Unrealized loss on equity securities400 117 
Other non-cash income(2)(2)
Changes in operating assets and liabilities:
Accounts receivable1,840 (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 liabilities3,052 3,709 
Other current liabilities4,376 (2,202)
Long-term operating lease liabilities(32,558)(31,886)
Other long-term liabilities(10)(1,174)
NET CASH PROVIDED BY OPERATING ACTIVITIES54,333 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 exercises334 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 PERIOD302,406 146,873 
CASH AND CASH EQUIVALENTS AT END OF PERIOD$256,998 $321,421 
See accompanying Notes to Condensed Consolidated Financial Statements.
8 | Shake Shack Inc. shak-20220928_g2.jpg Form 10-Q

SHAKE SHACK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
Shake Shack Inc. shak-20220928_g2.jpg Form 10-Q | 9

NOTE 1: NATURE OF OPERATIONS
Shake Shack Inc. was formed on September 23, 2014 as a Delaware corporation for the purpose of facilitating an initial public offering and other related transactions in order to carry on the business of SSE Holdings, LLC and its subsidiaries ("SSE Holdings"). Shake Shack is the sole managing member of SSE Holdings and, as sole managing member, the Company operates and controls all of the business and affairs of SSE Holdings. As a result, the Company consolidates the financial results of SSE Holdings and reports a non-controlling interest representing the economic interest in SSE Holdings held by the other members of SSE Holdings. As of September 28, 2022 the Company owned 93.2% of SSE Holdings. Unless the context otherwise requires, "we," "us," "our," "Shake Shack," the "Company" and other similar references, refer to Shake Shack Inc. and, unless otherwise stated, all of its subsidiaries, including SSE Holdings.
The Company operates and licenses Shake Shack restaurants ("Shacks"), which serve burgers, chicken, hot dogs, crinkle cut fries, shakes, frozen custard, beer, wine and more. As of September 28, 2022, there were 402 Shacks in operation, system-wide, of which 232 were domestic Company-operated Shacks, 30 were domestic licensed Shacks and 140 were international licensed Shacks.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Shake Shack Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. These interim Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and on a basis consistent in all material respects with the accounting policies described in its Annual Report on Form 10-K for the fiscal year ended December 29, 2021 ("2021 Form 10-K"). Certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These interim Condensed Consolidated Financial Statements should be read in conjunction with the consolidated financial statements and related notes thereto included in its 2021 Form 10-K. In the Company's opinion, all adjustments, which are normal and recurring in nature, necessary for a fair presentation of the financial position and results of operation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year.
SSE Holdings is considered a variable interest entity. Shake Shack Inc. is the primary beneficiary as the Company has the majority economic interest in SSE Holdings and, as the sole managing member, has decision making authority that significantly affects the economic performance of the entity, while the limited partners have no substantive kick-out or participating rights. As a result, the Company consolidates SSE Holdings. The assets and liabilities of SSE Holdings represent substantially all of the Company's consolidated assets and liabilities with the exception of certain deferred taxes and liabilities under the Tax Receivable Agreement. As of September 28, 2022 and December 29, 2021, the net assets of SSE Holdings were $364,693 and $376,857, respectively. The assets of SSE Holdings are subject to certain restrictions in SSE Holdings' revolving credit agreement. Refer to Note 6, Debt, for additional information.
Fiscal Year
The Company operates on a 52/53 week fiscal year ending on the last Wednesday of December. Fiscal 2022 contains 52 weeks and ends on December 28, 2022. Fiscal 2021 contained 52 weeks and ended on December 29, 2021. Unless otherwise stated, references to years in this report relate to fiscal years.
Use of Estimates
The preparation of these Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates.
10 | Shake Shack Inc. shak-20220928_g2.jpg Form 10-Q

Recently Adopted Accounting Pronouncements
The Company adopted the Accounting Standards Update (“ASU”) summarized below in fiscal 2022.
Accounting Standards UpdateDescriptionDate
Adopted
Government Assistance (Topic 832)—Disclosures by Business Entities about Government Assistance

(ASU 2021-10)
This ASU requires certain disclosures about transactions with a government that have been accounted for by analogizing to a grant or contribution accounting model to increase transparency about the types of transactions, the accounting for the transactions and the effect of the transactions on an entity’s financial statements.

The guidance of this ASU is primarily related to disclosures of certain transactions with a government and therefore did not have a material impact on the financial statements. Refer to Note 10, Income Taxes, for disclosure of our accounting for the Employee Retention Credit received.
December 30, 2021
Recently Issued Accounting Pronouncements
The Company reviewed all recently issued accounting pronouncements and concluded that they were not applicable or not expected to have a significant impact on our Condensed Consolidated Financial Statements.
NOTE 3: REVENUE
Revenue Recognition
Revenue primarily consists of Shack sales and Licensing revenue. Generally, revenue is recognized as promised goods or services transfer to the guest or customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
Revenue from Shack sales is recognized when payment is tendered at the point of sale, net of discounts, as the performance obligation has been satisfied. Sales tax collected from guests is excluded from Shack sales and the obligation is included as sales tax payable until the taxes are remitted to the appropriate taxing authorities. Revenue from gift cards is deferred and recognized over time as redemptions occur.
During fiscal 2022, the Company concluded it has accumulated a sufficient level of historical data from a large pool of homogeneous transactions to allow us to reasonably and objectively determine an estimated gift card breakage rate and the pattern of actual gift card redemptions. Accordingly, the Company recognizes breakage income and reduces the related gift card liability for unredeemed gift cards in proportion to actual redemptions of gift cards. The Company will continue to review historical gift card redemption information at each reporting period to assess the continued appropriateness of the gift card breakage rate and pattern of redemption.
In accordance with ASC 250, Accounting Changes and Error Corrections, the Company concluded that this accounting change represented a change in accounting estimate. As a result, a cumulative catch-up adjustment was recorded during the thirteen weeks ended March 30, 2022 that resulted in $1,281 of gift card breakage income. Inclusive of this cumulative catch-up, $1,415 of gift card breakage income was recognized during the thirty-nine weeks ended September 28, 2022. Gift card breakage income is included in Shack sales in the Condensed Consolidated Statements of Income (Loss).
Licensing revenue includes initial territory fees, Shack opening fees and ongoing sales-based royalty fees from licensed Shacks. Generally, the licenses granted to develop, open and operate each Shack in a specified territory are the predominant good or service transferred to the licensee and represent distinct performance obligations. Ancillary promised services, such as training and assistance during the initial opening of a Shack, are typically combined with the license and considered one performance obligation per Shack. The Company determines the transaction price for each contract, which is comprised of the initial territory fee and an estimate of the total Shack opening fees the Company expects to be entitled to. The calculation of total Shack opening fees included in the transaction price requires judgment, as it is based on an estimated number of Shacks the Company
Shake Shack Inc. shak-20220928_g2.jpg Form 10-Q | 11

expects the licensee to open. The transaction price is then allocated equally to each Shack expected to open. Revenue is recognized on a straight-line basis over the license term, therefore the performance obligation is satisfied over time, starting when a Shack opens through the end of the license term for the related Shack. Generally, payment for the initial territory fee is received upon execution of the license agreement and payment for the Shack opening fees is received either in advance of or upon opening the related Shack. These payments are initially deferred and recognized in revenue as the performance obligations are satisfied, which occurs over a long-term period. Revenue from sales-based royalties is recognized as the related sales occur.
Revenue recognized during the thirteen and thirty-nine weeks ended September 28, 2022 and September 29, 2021, disaggregated by type was as follows:
Thirteen Weeks EndedThirty-Nine Weeks Ended
September 28
2022
September 29
2021
September 28
2022
September 29
2021
Shack sales$219,501 $186,972 $639,346 $519,110 
Licensing revenue:
Sales-based royalties8,050 6,711 21,936 16,961 
Initial territory and opening fees263 212 675 566 
Total revenue$227,814 $193,895 $661,957 $536,637 
The aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as of September 28, 2022 was $19,808. The Company expects to recognize this amount as revenue over a long-term period, as the license term for each Shack ranges from 5 to 20 years. This amount excludes any variable consideration related to sales-based royalties.
Contract Balances
Contract liabilities and receivables from contracts with customers were as follows:
September 28
2022
December 29
2021
Shack sales receivables$6,607 $6,939 
Licensing receivables, net of allowance for doubtful accounts3,790 4,005 
Gift card liability1,743 3,297 
Deferred revenue, current892 763 
Deferred revenue, long-term14,358 12,669 
Revenue recognized during the thirteen and thirty-nine weeks ended September 28, 2022 and September 29, 2021 that was included in the respective liability balances at the beginning of the period was as follows:
Thirteen Weeks EndedThirty-Nine Weeks Ended
September 28
2022
September 29
2021
September 28
2022
September 29
2021
Gift card liability(1)
$82 $73 $1,725 $400 
Deferred revenue234 203 638 543 
(1)For the thirty-nine weeks ended September 28, 2022, amount includes the cumulative catch-up adjustment that resulted in $1,281 of gift card breakage income as noted above.
12 | Shake Shack Inc. shak-20220928_g2.jpg Form 10-Q

NOTE 4: FAIR VALUE MEASUREMENTS
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The carrying value of the Company's Cash and cash equivalents, Accounts receivable, net, Accounts payable and Accrued expenses approximates fair value due to the short-term nature of these financial instruments.
As of September 28, 2022 and December 29, 2021, the Company held certain assets that are required to be measured at fair value on a recurring basis including Marketable securities, which consist of investments in equity securities. The fair value of these investments is measured using Level 1 inputs. The carrying value of these investments in equity securities approximates fair value.
Assets measured at fair value on a recurring basis as of September 28, 2022 and December 29, 2021 were as follows:
Fair Value Measurements
September 28
2022
December 29
2021
Level 1Level 1
Equity securities:
Mutual funds$80,015 $80,000 
Total Marketable securities$80,015 $80,000 
Refer to Note 6, Debt, for additional information relating to the fair value of the Company's outstanding debt instruments.
A summary of other income (expense) from equity securities recognized during the thirteen and thirty-nine weeks ended September 28, 2022 and September 29, 2021 was as follows:
Thirteen Weeks EndedThirty-Nine Weeks Ended
September 28
2022
September 29
2021
September 28
2022
September 29
2021
Equity securities:
Dividend income$290 $56 $502 $223 
Realized gain (loss) on sale of investments   (5)
Unrealized gain (loss) on equity securities161 (80)(400)(117)
Total$451 $(24)$102 $101 
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
Assets and liabilities measured at fair value on a non-recurring basis include long-lived assets, operating lease right-of-use assets and indefinite-lived intangible assets. There were no impairment charges recognized during the thirteen and thirty-nine weeks ended September 28, 2022 and September 29, 2021.
Shake Shack Inc. shak-20220928_g2.jpg Form 10-Q | 13

NOTE 5: SUPPLEMENTAL BALANCE SHEET INFORMATION
The components of Other current liabilities as of September 28, 2022 and December 29, 2021 were as follows:
September 28
2022
December 29
2021
Sales tax payable$4,846 $4,575 
Gift card liability1,743 3,297 
Current portion of financing equipment lease liabilities2,546 2,711 
Legal reserve7,065 533 
Other3,297 3,385 
Other current liabilities$19,497 $14,501 
The components of Other long-term liabilities as of September 28, 2022 and December 29, 2021 were as follows:
September 28
2022
December 29
2021
Deferred licensing revenue$14,358 $12,669 
Long-term portion of financing equipment lease liabilities3,584 4,303 
Other2,646 5,801 
Other long-term liabilities$20,588 $22,773 
NOTE 6: DEBT
The components of Long-term debt as of September 28, 2022 and December 29, 2021 were as follows:
September 28
2022
December 29
2021
2021 Convertible Notes$250,000 $250,000 
Discount and debt issuance costs, net of amortization5,672 6,458 
Total Long-term debt$244,328 $243,542 
Convertible Notes
In March 2021, the Company issued $250,000 aggregate principal amount of 0% Convertible Senior Notes due 2028 (“Convertible Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933. The Convertible Notes will mature on March 1, 2028, unless earlier converted, redeemed or repurchased in certain circumstances. Upon conversion, the Company pays or delivers, as the case may be, cash, shares of Class A common stock or a combination of cash and shares of Class A common stock, at the Company's election.
The Convertible Notes are convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding December 1, 2027, only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ending on June 30, 2021 (and only during such fiscal quarter), if the last reported sale price of the Company's Class A common stock, par value $0.001 per share, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price for the Convertible Notes on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per one thousand dollar principal amount of the Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of Class A common stock and the conversion rate for the Convertible Notes on each such trading day; (3) if the Company calls such Convertible Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date,
14 | Shake Shack Inc. shak-20220928_g2.jpg Form 10-Q

but only with respect to the Convertible Notes called (or deemed called) for redemption; and (4) upon the occurrence of specified corporate events as set forth in the Indenture. On or after December 1, 2027, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Convertible Notes may convert all or any portion of their Convertible Notes at any time, regardless of the foregoing circumstances.
The Convertible Notes had an initial conversion rate of 5.8679 shares of Class A common stock per one thousand dollar principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $170.42 per share of Class A common stock.
Shake Shack may not redeem the Convertible Notes prior to March 6, 2025. The Company may redeem for cash all or any portion of the Convertible Notes, at the Company's option, on or after March 6, 2025 if the last reported sale price of Class A common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid special interest, if any, to, but excluding, the redemption date.
In addition, if Shake Shack undergoes a fundamental change (as defined in the indenture governing the Convertible Notes), subject to certain conditions, holders may require it to repurchase for cash all or any portion of their Convertible Notes at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid special interest, if any, to, but excluding, the fundamental change repurchase date. In addition, following certain corporate events that occur prior to the maturity date of the Convertible Notes or if the Company delivers a notice of redemption in respect of some or all of the Convertible Notes, the Company will, in certain circumstances, increase the conversion rate of the Convertible Notes for a holder who elects to convert the Convertible Notes in connection with such a corporate event or convert the Convertible Notes called (or deemed called) for redemption during the related redemption period, as the case may be.
Contemporaneously with the issuance of the Convertible Notes, Shake Shack Inc. entered into an intercompany note with SSE Holdings (“Intercompany Note”). SSE Holdings promises to pay Shake Shack Inc., for value received, the principal amount with interest of the Intercompany Note in March 2028. Shake Shack Inc. will exercise its right to convert the Intercompany Note to maintain at all times a one-to-one ratio between the number of common units, directly or indirectly, held by Shake Shack Inc. and the aggregate number of outstanding shares of common stock.
Total amortization expense for the thirteen and thirty-nine weeks ended September 28, 2022 was $262 and $786, respectively, and $262 and $605, respectively, for the thirteen and thirty-nine weeks ended September 29, 2021 and was included in Interest expense in the Condensed Consolidated Statements of Income (Loss). In connection with the issuance of the Convertible Notes, the Company also incurred consulting and advisory fees of $236 for the thirty-nine weeks ended September 29, 2021 and was included in General and administrative expenses in the Condensed Consolidated Statements of Income (Loss).
At September 28, 2022, the fair value of the Convertible Notes was approximately $168,250, based on external pricing data, including available quoted market prices of these instruments, and consideration of comparable debt instruments with similar interest rates and trading frequency, among other factors, and is classified as a Level 2 measurement within the fair value hierarchy.
Revolving Credit Facility
The Company maintains a revolving credit facility agreement ("Revolving Credit Facility") which permits borrowings up to $50.0 million and issuance of letters of credit upon our request of up to $15.0 million. As of September 28, 2022 and December 29, 2021, no amounts were outstanding under the Revolving Credit Facility.
In August 2022, the Company entered into an irrevocable standby letter of credit to secure obligations under the workers' compensation insurance coverage in the amount of $1,260, which expires in July 2023 and renews automatically for one-year periods. As of September 28, 2022, the Company maintained $1,863 of letters of credit in connection with the Revolving Credit Facility. The Company maintained a letter of credit of $603 in connection with the Revolving Credit Facility as of December 29, 2021.
As of September 28, 2022, the Revolving Credit Facility had unamortized deferred financing costs of $67 which were included in Other assets on the Condensed Consolidated Balance Sheets. Total interest expense related to the Revolving Credit Facility for
Shake Shack Inc. shak-20220928_g2.jpg Form 10-Q | 15

the thirteen and thirty-nine weeks ended September 28, 2022 was $28 and $101, respectively, and $37 and $442, respectively, for the thirteen and thirty-nine weeks ended September 29, 2021. Interest expense for the thirty-nine weeks ended September 29, 2021 primarily included the write-off of previously capitalized costs on the Revolving Credit Facility.
The Revolving Credit Facility requires the Company to comply with maximum net lease adjusted leverage and minimum fixed charge coverage ratios, as well as other customary affirmative and negative covenants. As of September 28, 2022, the Company was in compliance with all covenants.
NOTE 7: LEASES
Nature of Leases
Shake Shack currently leases all of its domestic Company-operated Shacks, the home office and certain equipment under various non-cancelable lease agreements that expire on various dates through 2044. The Company evaluates contracts entered into to determine whether the contract involves the use of property or equipment, which is either explicitly or implicitly identified in the contract. The Company evaluates whether it controls the use of the asset, which is determined by assessing whether substantially all economic benefits from the use of the asset is obtained, and whether the Company has the right to direct the use of the asset. If these criteria are met and the Company has identified a lease, the contract is accounted for under the requirements of Accounting Standards Codification Topic 842.
Upon possession of a leased asset, the Company determines whether the lease is an operating or finance lease. Real estate leases are classified as operating leases and most of the equipment leases are classified as finance leases. Generally, real estate leases have initial terms ranging from 10 to 15 years and typically include two five-year renewal options. Renewal options are generally not recognized as part of the right-of-use assets and lease liabilities as it is not reasonably certain at commencement date that the Company would exercise the renewal options. Real estate leases typically contain fixed minimum rent payments and/or contingent rent payments which are based upon sales in excess of specified thresholds. When the achievement of such sales thresholds are deemed to be probable, contingent rent is accrued in proportion to the sales recognized during the period.
Fixed minimum rent payments are recognized on a straight-line basis over the lease term from the date the Company takes possession of the leased property. Lease expense incurred before a Shack opens is recorded in Pre-opening costs on the Condensed Consolidated Statements of Income (Loss). Once a domestic Company-operated Shack opens, the straight-line lease expense and contingent rent, if applicable, is recorded in Occupancy and related expenses on the Condensed Consolidated Statements of Income (Loss). Many of the leases also require the Company to pay real estate taxes, common area maintenance costs and other occupancy costs which are included in Occupancy and related expenses on the Condensed Consolidated Statements of Income (Loss).
The Company uses its incremental borrowing rate ("IBR") in determining the present value of future lease payments as there are no explicit rates provided in the leases. The IBR used to measure the lease liability is derived from the average of the yield curves obtained from using the notching method and the recovery rate method. The most significant assumption in calculating the IBR is the Company's credit rating and is subject to judgment. The credit rating used to develop the IBR is determined by utilizing the credit ratings of other public companies with similar financial information as SSE Holdings.

The Company expends cash for leasehold improvements to build out and equip leased properties. Generally, a portion of the leasehold improvements and building costs are reimbursed by the landlords through landlord incentives pursuant to agreed-upon terms in the lease agreements. Landlord incentives usually take the form of cash, full or partial credits against future minimum or contingent rents otherwise payable by the Company, or a combination thereof. In most cases, landlord incentives are received after the Company takes possession of the property and as milestones are met during the construction of the property. The Company includes these amounts in the measurement of the initial operating lease liability, which are also reflected as a reduction to the initial measurement of the right-of-use asset.
16 | Shake Shack Inc. shak-20220928_g2.jpg Form 10-Q

A summary of operating and finance lease assets and lease liabilities as of September 28, 2022 and December 29, 2021 were as follows:
ClassificationSeptember 28
2022
December 29
2021
Operating leasesOperating lease assets$370,536 $347,277 
Finance leasesProperty and equipment, net5,911 6,810 
Total right-of-use assets$376,447 $354,087 
Operating leases:
Operating lease liabilities, current$40,690 $35,519 
Long-term operating lease liabilities429,165 400,113 
Finance leases:
Other current liabilities2,546 2,711 
Other long-term liabilities3,584 4,303 
Total lease liabilities$475,985 $442,646 
The components of lease expense for the thirteen and thirty-nine weeks ended September 28, 2022 and September 29, 2021 were as follows:
Thirteen Weeks EndedThirty-Nine Weeks Ended
ClassificationSeptember 28
2022
September 29
2021
September 28
2022
September 29
2021
Operating lease costOccupancy and related expenses
Pre-opening costs
General and administrative expenses
$15,178 $12,497 $43,188 $37,213 
Finance lease cost:
Amortization of right-of-use assetsDepreciation and amortization expense750 715 2,275