Tax Receivable Agreement

3 Months Ended

Mar. 29, 2024

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 March 29, 2024, the Company recognized a total liability of $80,562, of which $12,827 and $67,735 are recorded within the current and noncurrent tax receivable agreement liability financial statement line items, respectively. As of December 29, 2023, the Company recognized a total liability of $102,036, of which $21,107 and $80,929 was recorded within the current and noncurrent tax receivable agreement liability financial statement line items, respectively. For the three months ended March 29, 2024 and March 31, 2023, the Company recognized measurement adjustments of $(367) and $144, respectively, which were recognized in other expense (income), net, on the condensed consolidated statements of operations. During the three months ended March 29, 2024 and March 31, 2023, the Company made payments to TRA participants of $22,089 and $10,468 respectively, which included interest of $982 and $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 $24 and $124 as of March 29, 2024 and December 29, 2023, respectively. During the three months ended March 29, 2024, $1,787 of the amount held in escrow was forfeited by pre-IPO owners due to the failure to meet certain required performance hurdles and distributed to certain shareholders, resulting in the reversal of previously recognized compensation expense. The amount distributed to certain shareholders represents a non-cash financing distribution for the three months ended March 29, 2024. For the three months ended March 29, 2024 and March 31, 2023, the Company recorded $(1,687) and $279 within selling, general, and administrative expenses in the accompanying condensed consolidated statement of operations.