Shake Shack Inc. (SHAK) Cash Flow Statement

The persistent premium of operating cash flow over net income, highlighted by the 3.63x multiple in 2026Q2, is driven by substantial depreciation and amortization, which averaged around $27M per quarter over the last two years. This suggests the business model generates significant cash from operations that is not reflected in its volatile net income, but it also means the company is highly reliant on these non-cash charges to bridge the gap. The negative OCF/NI ratio in 2026Q1 and 2024Q3, however, shows this dynamic can reverse sharply when net income turns negative, warranting scrutiny of the underlying accruals.

The FCF margin has deteriorated from a high of 7.5% in 2025Q2 to negative 4.7% in 2026Q1 and negative 0.2% in 2026Q2. This compression is almost entirely attributable to a step-change in capital intensity, with CapEx as a percentage of revenue jumping from an average of ~10.5% in 2024 to ~13-15% in 2026. While revenue growth is accelerating, the company's reinvestment cycle has intensified, temporarily sacrificing free cash flow for long-term expansion, which aligns with the prior finding of accelerating top-line growth.

The CapEx/Rev ratio has increased in 7 of the last 10 quarters, with the most significant acceleration occurring in the first half of 2026. This appears to be primarily growth capital expenditure related to new unit development, rather than maintenance, given the correlation with reported revenue growth acceleration. The current spending level of over $57M per quarter significantly exceeds the quarterly average depreciation of approximately $27M, suggesting the company is investing well beyond the replacement needs of its existing asset base to fuel expansion.

Every single quarter in the provided dataset shows a negative working capital change, indicating a structural cash drain. This pattern is unusual for a restaurant chain and may suggest the company is funding its aggressive growth with inventory build-outs for new locations or experiencing extended payable cycles. The magnitude of this drain has generally increased in parallel with CapEx, implying the working capital investment is a necessary companion to the physical expansion and represents a key risk to near-term liquidity if growth stalls.

This substantial gap confirms that GAAP net income is a poor proxy for the cash economics of Shake Shack's business model. The core operation is a powerful cash generator, but this reality is masked by significant non-cash charges and the heavy reinvestment cycle. The cumulative free cash flow over this period is approximately $51M, which is very close to the cumulative net income, revealing that nearly all the operating cash flow is being funneled directly back into the business via capital expenditures. This indicates a self-funding growth model but one that leaves minimal free cash for other strategic uses.