Tax Receivable Agreement

9 Months Ended

Sep. 29, 2023

Tax Receivable Agreement [Abstract]

Tax Receivable Agreement

Tax Receivable Agreement

On July 29, 2021, the Company executed a Tax Receivable Agreement (“TRA”) with certain pre-IPO owners (“TRA Participants”). The TRA provides for payment by the Company to the TRA Participants of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that the Company utilizes in the future from net operating losses and certain other tax benefits that arose prior to the IPO. The Company recognizes this contingent liability in its condensed consolidated financial statements when incurrence of the liability becomes probable and amounts are reasonably estimable. Subsequent changes to the measurement of the TRA liability are recognized in the condensed consolidated statements of operations as a component of other expense (income), net. The Company will retain the benefit of the remaining 15% of these cash tax savings.

As of September 29, 2023, the Company recognized a total liability of $102,036, of which $21,107 and $80,929 are recorded within the current and noncurrent tax receivable agreement liability financial statement line items, respectively. As of December 30, 2022, the Company recognized a total liability of $111,453, of which $10,191 and $101,262 was recorded within the current and noncurrent tax receivable agreement liability financial statement line items, respectively. For the three months and nine months ended September 29, 2023, the Company recognized measurement adjustments of $631 and $775, respectively, which were recognized in other expense (income), net, on the condensed consolidated statements of operations. For the three months and nine months ended September 30, 2022, the Company recognized measurement adjustments of $86, which were recognized in other expense (income), net, on the condensed consolidated statements of operations. During the nine months ended September 29, 2023, the Company made its first payment to TRA participants of $10,468, which included interest of $277.

With respect to certain pre-IPO owners that are not TRA Participants, the Company has recorded amounts held in escrow for these participants in prepaid expense of $329 and $1,169 as of September 29, 2023 and December 30, 2022, respectively. During the nine months ended September 29, 2023, $396 of the amount held in escrow was forfeited by a pre-IPO owner and distributed to certain shareholders, resulting in a reduction of the prepaid expense balance and reversal of compensation expense. As a result, the Company recorded $205 and $438 during the three months and nine months ended September 29, 2023, in compensation expense within selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. During the three months and nine months ended September 30, 2022, the Company recorded $279 and $837, respectively, in compensation expense within selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.