COMPARABLE SALES INCREASE 5% DRIVEN BY
TRANSACTION GROWTH AS MARGINS EXPAND
NEWPORT
BEACH, Calif., Oct. 26,
2023 /PRNewswire/ -- Chipotle Mexican Grill, Inc.
(NYSE: CMG) today reported financial results for its third quarter
ended September 30, 2023.
Third quarter highlights, year over year:
- Total revenue increased 11.3% to $2.5
billion
- Comparable restaurant sales increased 5.0%
- Operating margin was 16.0%, an increase from 15.1%
- Restaurant level operating margin was 26.3% 1, an
increase of 100 basis points
- Diluted earnings per share was $11.32, a 23.0% increase from $9.20. Adjusted diluted earnings per share, which
excluded a $0.04 after-tax impact
from expenses related to corporate restructuring, was $11.361, a 19.5% increase from
$9.511.
- Opened 62 new restaurants with 54 locations including a
Chipotlane
"Chipotle's value proposition including customized, delicious
culinary served quickly with great hospitality, is stronger than
ever which is translating to great results including sustained
positive transaction growth. We remain focused on developing
exceptional people, preparing delicious food and fast throughput
which will further strengthen our brand and continue to position us
for long term growth," said Brian
Niccol, Chairman and CEO, Chipotle.
Results for the three months ended September 30, 2023:
Total revenue in the third quarter was $2.5 billion, an increase of 11.3% compared to
the third quarter of 2022. The increase in total revenue was driven
by new restaurant openings, and a 5.0% increase in comparable
restaurant sales attributable to higher transactions and, to a
lesser extent, an increase in average check. Digital sales
represented 36.6% of total food and beverage revenue.
We opened 62 new restaurants during the third quarter with 54
locations including a Chipotlane. These formats continue to perform
well and are helping enhance guest access and convenience, as well
as increase new restaurant sales, margins, and returns.
Food, beverage and packaging costs in the third quarter were
29.7% of total revenue, a decrease of about 10 basis points
compared to the third quarter of 2022. The benefit from last year's
menu price increases was mostly offset by inflation across several
food costs, primarily beef and queso.
Restaurant level operating margin in the third quarter was 26.3%
compared to 25.3% in the third quarter of 2022. The improvement was
primarily due to the benefit of sales leverage, partially offset by
higher inflation across several food costs and, to a lesser extent,
wage inflation.
General and administrative expenses for the third quarter were
$159.5 million on a GAAP basis, or
$158.2 million on a non-GAAP basis,
excluding $1.3 million of corporate
restructuring costs related to the May
2023 optimization of our organizational structure. GAAP and
non-GAAP general and administrative expenses for the third quarter
also include $119.3 million of
underlying general and administrative expenses, $34.3 million of non-cash stock compensation,
$3.4 million of higher
performance-based accruals and payroll taxes on equity vesting and
exercises and $1.2 million of other
costs, primarily related to our upcoming All Managers Conference
scheduled for the first quarter of 2024.
The effective income tax rate for the third quarter was 24.2%
compared to 24.4% in the third quarter of 2022. The decrease in the
effective income tax rate was primarily due to a decrease in
uncertain tax position reserves and higher income tax credits,
mostly offset by a decrease in tax benefits from option exercises
and equity vesting.
Net income for the third quarter was $313.2 million, or $11.32 per diluted share, compared to
$257.1 million, or $9.20 per diluted share, in the third quarter of
2022. In the third quarter of 2023, excluding the $0.04 after-tax impact from expenses related to
corporate restructuring, adjusted diluted earnings per share was
$11.36.
During the third quarter, our Board of Directors approved
the investment of up to an additional $300
million, exclusive of commissions, to repurchase shares of
our common stock, subject to market conditions. Including this
repurchase authorization, $368.4 million was available as of
September 30, 2023. The repurchase
authorization may be modified, suspended, or discontinued at any
time. We repurchased $226.3 million of stock at an average price
per share of $1,913.98 during
the third quarter.
More information will be available in our Quarterly Report on
Form 10-Q, which will be filed with the SEC by the end of
October.
Outlook
For 2023, management is anticipating the following:
- Fourth quarter and full year comparable restaurant sales growth
in the mid to high-single digit range
- 255 to 285 new restaurant openings (including 10 to 15
relocations to add a Chipotlane), which assumes utility,
construction, permit and inspection delays do not worsen
- An estimated underlying effective full year tax rate between
25% and 27% before discrete items
- For 2024, management is anticipating the following:
- 285 to 315 new restaurant openings, which assumes utility,
construction, permit and inspection delays do not worsen
Definitions
The following definitions apply to these terms as used
throughout this release:
- Comparable restaurant sales, or sales comps, and comparable
restaurant transactions, represent the change in
period-over-period total revenue or transactions for restaurants in
operation for at least 13 full calendar months.
- Average restaurant sales refer to the average trailing
12-month food and beverage revenue for restaurants in operation for
at least 12 full calendar months.
- Restaurant level operating margin represents total
revenue less direct restaurant operating costs, expressed as a
percent of total revenue.
- Digital sales represent food and beverage revenue
generated through the Chipotle website, Chipotle app or third-party
delivery aggregators. Digital sales include revenue deferrals
associated with Chipotle Rewards.
Conference Call Details
Chipotle will host a conference call on Thursday, October 26, 2023, at 4:30 PM Eastern time to discuss third quarter
2023 financial results as well as provide a business update for the
fourth quarter 2023.
The conference call can be accessed live over the phone by
dialing 1-888-317-6003, or for international callers by dialing
1-412-317-6061, and use code: 3311473. The call will be webcast
live from the company's website on the investor relations page at
ir.chipotle.com/events. An archived webcast will be available
approximately one hour after the end of the call.
About Chipotle
Chipotle Mexican Grill, Inc. (NYSE: CMG) is cultivating a better
world by serving responsibly sourced, classically-cooked, real food
with wholesome ingredients without artificial colors, flavors or
preservatives. Chipotle had over 3,300 restaurants as of
September 30, 2023, in the United States, Canada, the United
Kingdom, France and
Germany and is the only restaurant
company of its size that owns and operates all its restaurants in
North America and Europe. Chipotle is ranked on the Fortune 500
and is recognized on the 2023 list for Fortune's Most Admired
Companies and Time Magazine's Most Influential Companies. With over
110,000 employees passionate about providing a great guest
experience, Chipotle is a longtime leader and innovator in the food
industry. Chipotle is committed to making its food more accessible
to everyone while continuing to be a brand with a demonstrated
purpose as it leads the way in digital, technology and sustainable
business practices. For more information or to place an order
online, visit WWW.CHIPOTLE.COM.
Forward-Looking Statements
Certain statements in this press release and in the
October 26, 2023, conference call are
forward-looking statements as defined in the Private Securities
Litigation Reform Act of 1995, including statements under "Outlook"
about our anticipated fourth quarter and full year 2023 comparable
restaurant sales growth, goals for number of new restaurant
openings, and estimated underlying effective full year tax rate, as
well as statements about expected restaurants with Chipotlanes and
rate of expansion, future labor costs, future general and
administrative and other costs, future estimated tax rates and
future long-term prospects. We use words such as "anticipate",
"believe", "could", "should", "may", "approximately", "estimate",
"expect", "intend", "project", "target", and similar terms and
phrases, including references to assumptions, to identify
forward-looking statements. The forward-looking statements in this
press release are based on currently available operating, financial
and competitive information available to us as of the date of this
release and we assume no obligation to update these forward-looking
statements. These statements are subject to risks and uncertainties
that could cause actual results to differ materially from those
described in the statements, including but not limited to:
increasing wage inflation and the competitive labor market,
including as a result of regulations such as California AB 1228,
which impacts our ability to attract and retain qualified employees
and has resulted in occasional staffing shortages; the impact of
any union organizing efforts and our responses to such efforts;
increasing supply costs (including beef, tortillas, queso, salsa,
beans and rice); risks of food safety incidents and food-borne
illnesses; risks associated with our reliance on certain
information technology systems and potential material failures or
interruptions; privacy and cyber security risks, including risk of
breaches, unauthorized access, theft, modification or destruction
of guest or employee personal or confidential information stored on
our network or the network of third party providers; the impact of
competition, including from sources outside the restaurant
industry; the financial impact of increasing our average hourly
wages; the impact of federal, state or local government regulations
relating to our employees, employment practices, restaurant design
and construction, and the sale of food or alcoholic beverages; our
ability to achieve our planned growth, such as the costs and
availability of suitable new restaurant sites, construction
materials and contractors and the expected costs to accelerate our
international expansion through franchise restaurants in the
Middle East; increases in
ingredient and other operating costs due to inflation, global
conflicts, climate change, our Food with Integrity philosophy,
tariffs or trade restrictions and supply shortages; the uncertainty
of our ability to achieve expected levels of comparable restaurant
sales due to factors such as changes in consumers' perceptions of
our brand, including as a result of actual or rumored food safety
concerns or other negative publicity, decreased consumer spending
(including as a result of higher inflation, mass layoffs, fear of
possible recession and higher energy prices), or the inability to
increase menu prices or realize the benefits of menu price
increases; risks associated with our digital business, including
risks arising from our reliance on third party delivery services;
risks relating to litigation, including possible governmental
actions and potentially class action litigation related to food
safety incidents, cybersecurity incidents, employment or privacy
laws, advertising claims or other matters; and other risk factors
described from time to time in our SEC reports, including our
annual report on Form 10-K and quarterly reports on Form 10-Q, all
of which are available on the investor relations page of our
website at ir.Chipotle.com.
1
|
Restaurant level
operating margin, adjusted diluted earnings per share,
adjusted net income, non-GAAP general and administrative
expenses, and non-GAAP effective income tax rate are non-GAAP
financial measures. Reconciliations to GAAP measures and further
information are set forth in the table at the end of this press
release.
|
CHIPOTLE
MEXICAN GRILL, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(in thousands,
except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30,
|
|
2023
|
|
2022
|
Food and beverage
revenue
|
$
|
2,456,039
|
|
99.4
|
%
|
|
$
|
2,202,336
|
|
99.2
|
%
|
Delivery service
revenue
|
|
15,909
|
|
0.6
|
|
|
|
17,839
|
|
0.8
|
|
Total
revenue
|
|
2,471,948
|
|
100.0
|
|
|
|
2,220,175
|
|
100.0
|
|
Restaurant operating
costs (exclusive of depreciation and amortization shown separately
below):
|
|
|
|
|
|
|
|
|
|
|
|
Food, beverage and
packaging
|
|
734,186
|
|
29.7
|
|
|
|
662,540
|
|
29.8
|
|
Labor
|
|
616,282
|
|
24.9
|
|
|
|
557,178
|
|
25.1
|
|
Occupancy
|
|
126,269
|
|
5.1
|
|
|
|
115,826
|
|
5.2
|
|
Other operating
costs
|
|
345,368
|
|
14.0
|
|
|
|
322,085
|
|
14.5
|
|
General and
administrative expenses
|
|
159,501
|
|
6.5
|
|
|
|
140,896
|
|
6.3
|
|
Depreciation and
amortization
|
|
78,546
|
|
3.2
|
|
|
|
71,416
|
|
3.2
|
|
Pre-opening
costs
|
|
9,605
|
|
0.4
|
|
|
|
7,618
|
|
0.3
|
|
Impairment, closure
costs, and asset disposals
|
|
7,241
|
|
0.3
|
|
|
|
6,363
|
|
0.3
|
|
Total operating
expenses
|
|
2,076,998
|
|
84.0
|
|
|
|
1,883,922
|
|
84.9
|
|
Income from
operations
|
|
394,950
|
|
16.0
|
|
|
|
336,253
|
|
15.1
|
|
Interest and other
income, net
|
|
18,392
|
|
0.7
|
|
|
|
3,712
|
|
0.2
|
|
Income before income
taxes
|
|
413,342
|
|
16.7
|
|
|
|
339,965
|
|
15.3
|
|
Provision for income
taxes
|
|
(100,125)
|
|
(4.1)
|
|
|
|
(82,827)
|
|
(3.7)
|
|
Net income
|
$
|
313,217
|
|
12.7
|
%
|
|
$
|
257,138
|
|
11.6
|
%
|
Earnings per
share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
11.37
|
|
|
|
|
$
|
9.26
|
|
|
|
Diluted
|
$
|
11.32
|
|
|
|
|
$
|
9.20
|
|
|
|
Weighted-average common
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
27,550
|
|
|
|
|
|
27,773
|
|
|
|
Diluted
|
|
27,681
|
|
|
|
|
|
27,956
|
|
|
|
CHIPOTLE MEXICAN
GRILL, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(in thousands,
except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
September 30,
|
|
2023
|
|
2022
|
Food and beverage
revenue
|
$
|
7,304,557
|
|
99.3
|
%
|
|
$
|
6,394,094
|
|
99.1
|
%
|
Delivery service
revenue
|
|
50,772
|
|
0.7
|
|
|
|
59,959
|
|
0.9
|
|
Total
revenue
|
|
7,355,329
|
|
100.0
|
|
|
|
6,454,053
|
|
100.0
|
|
Restaurant operating
costs (exclusive of depreciation and amortization shown separately
below):
|
|
|
|
|
|
|
|
|
|
|
|
Food, beverage and
packaging
|
|
2,165,409
|
|
29.4
|
|
|
|
1,963,394
|
|
30.4
|
|
Labor
|
|
1,811,754
|
|
24.6
|
|
|
|
1,639,044
|
|
25.4
|
|
Occupancy
|
|
372,097
|
|
5.1
|
|
|
|
341,777
|
|
5.3
|
|
Other operating
costs
|
|
1,058,281
|
|
14.4
|
|
|
|
970,261
|
|
15.0
|
|
General and
administrative expenses
|
|
464,337
|
|
6.3
|
|
|
|
429,118
|
|
6.6
|
|
Depreciation and
amortization
|
|
233,902
|
|
3.2
|
|
|
|
212,814
|
|
3.3
|
|
Pre-opening
costs
|
|
23,341
|
|
0.3
|
|
|
|
18,219
|
|
0.3
|
|
Impairment, closure
costs, and asset disposals
|
|
31,842
|
|
0.4
|
|
|
|
15,354
|
|
0.2
|
|
Total operating
expenses
|
|
6,160,963
|
|
83.8
|
|
|
|
5,589,981
|
|
86.6
|
|
Income from
operations
|
|
1,194,366
|
|
16.2
|
|
|
|
864,072
|
|
13.4
|
|
Interest and other
income, net
|
|
43,787
|
|
0.6
|
|
|
|
14,071
|
|
0.2
|
|
Income before income
taxes
|
|
1,238,153
|
|
16.8
|
|
|
|
878,143
|
|
13.6
|
|
Provision for income
taxes
|
|
(291,502)
|
|
(4.0)
|
|
|
|
(202,769)
|
|
(3.1)
|
|
Net income
|
$
|
946,651
|
|
12.9
|
%
|
|
$
|
675,374
|
|
10.5
|
%
|
Earnings per
share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
34.31
|
|
|
|
|
$
|
24.20
|
|
|
|
Diluted
|
$
|
34.13
|
|
|
|
|
$
|
24.02
|
|
|
|
Weighted-average common
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
27,593
|
|
|
|
|
|
27,907
|
|
|
|
Diluted
|
|
27,739
|
|
|
|
|
|
28,116
|
|
|
|
CHIPOTLE MEXICAN
GRILL, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(in thousands,
except per share data)
|
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
2023
|
|
2022
|
|
(unaudited)
|
|
|
Assets
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
602,307
|
|
$
|
384,000
|
Accounts receivable,
net
|
|
71,122
|
|
|
106,880
|
Inventory
|
|
40,177
|
|
|
35,668
|
Prepaid expenses and
other current assets
|
|
104,038
|
|
|
86,412
|
Income tax
receivable
|
|
-
|
|
|
47,741
|
Investments
|
|
851,699
|
|
|
515,136
|
Total current
assets
|
|
1,669,343
|
|
|
1,175,837
|
Leasehold improvements,
property and equipment, net
|
|
2,093,011
|
|
|
1,951,147
|
Long-term
investments
|
|
473,247
|
|
|
388,055
|
Restricted
cash
|
|
25,315
|
|
|
24,966
|
Operating lease
assets
|
|
3,555,808
|
|
|
3,302,402
|
Other assets
|
|
72,830
|
|
|
63,158
|
Goodwill
|
|
21,939
|
|
|
21,939
|
Total assets
|
$
|
7,911,493
|
|
$
|
6,927,504
|
Liabilities and
shareholders' equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
$
|
207,541
|
|
$
|
184,566
|
Accrued payroll and
benefits
|
|
155,015
|
|
|
170,456
|
Accrued
liabilities
|
|
151,148
|
|
|
147,539
|
Unearned
revenue
|
|
156,320
|
|
|
183,071
|
Current operating
lease liabilities
|
|
244,994
|
|
|
236,248
|
Income tax
payable
|
|
172,689
|
|
|
-
|
Total current
liabilities
|
|
1,087,707
|
|
|
921,880
|
Long-term operating
lease liabilities
|
|
3,773,087
|
|
|
3,495,162
|
Deferred income tax
liabilities
|
|
111,089
|
|
|
98,623
|
Other
liabilities
|
|
53,296
|
|
|
43,816
|
Total
liabilities
|
|
5,025,179
|
|
|
4,559,481
|
Shareholders'
equity:
|
|
|
|
|
|
Preferred stock, $0.01
par value, 600,000 shares authorized, no shares issued as of
September
30, 2023 and December 31, 2022, respectively
|
|
-
|
|
|
-
|
Common stock, $0.01
par value, 230,000 shares authorized, 37,467 and 37,320 shares
issued
as of September 30, 2023 and December 31, 2022,
respectively
|
|
375
|
|
|
373
|
Additional paid-in
capital
|
|
1,917,868
|
|
|
1,829,304
|
Treasury stock, at
cost, 9,982 and 9,693 common shares as of September 30, 2023
and
December 31, 2022, respectively
|
|
(4,798,748)
|
|
|
(4,282,014)
|
Accumulated other
comprehensive loss
|
|
(8,080)
|
|
|
(7,888)
|
Retained
earnings
|
|
5,774,899
|
|
|
4,828,248
|
Total shareholders'
equity
|
|
2,886,314
|
|
|
2,368,023
|
Total liabilities and
shareholders' equity
|
$
|
7,911,493
|
|
$
|
6,927,504
|
CHIPOTLE MEXICAN
GRILL, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in
thousands)
(unaudited)
|
|
|
|
|
|
|
|
Nine months
ended
|
|
September
30,
|
|
2023
|
|
2022
|
Operating
activities
|
|
|
|
|
|
Net income
|
$
|
946,651
|
|
$
|
675,374
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
|
233,902
|
|
|
212,814
|
Deferred income tax
provision
|
|
12,465
|
|
|
(8,567)
|
Impairment, closure
costs, and asset disposals
|
|
30,536
|
|
|
15,127
|
Provision for credit
losses
|
|
565
|
|
|
(969)
|
Stock-based
compensation expense
|
|
86,557
|
|
|
77,371
|
Other
|
|
(17,272)
|
|
|
(13,045)
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
|
33,666
|
|
|
22,891
|
Inventory
|
|
(4,508)
|
|
|
(1,056)
|
Prepaid expenses and
other current assets
|
|
(23,494)
|
|
|
(3,169)
|
Operating lease
assets
|
|
185,056
|
|
|
171,464
|
Other
assets
|
|
(6,939)
|
|
|
(1,537)
|
Accounts
payable
|
|
4,886
|
|
|
10,774
|
Accrued payroll and
benefits
|
|
(14,902)
|
|
|
(32,861)
|
Accrued
liabilities
|
|
1,882
|
|
|
(16,562)
|
Unearned
revenue
|
|
(21,190)
|
|
|
(18,141)
|
Income tax
payable/receivable
|
|
220,427
|
|
|
(18,070)
|
Operating lease
liabilities
|
|
(156,180)
|
|
|
(153,200)
|
Other long-term
liabilities
|
|
5,910
|
|
|
2,968
|
Net cash provided by
operating activities
|
|
1,518,018
|
|
|
921,606
|
Investing
activities
|
|
|
|
|
|
Purchases of leasehold
improvements, property and equipment
|
|
(388,801)
|
|
|
(335,518)
|
Purchases of
investments
|
|
(845,981)
|
|
|
(513,813)
|
Maturities of
investments
|
|
440,788
|
|
|
202,997
|
Net cash used in
investing activities
|
|
(793,994)
|
|
|
(646,334)
|
Financing
activities
|
|
|
|
|
|
Acquisition of treasury
stock
|
|
(437,305)
|
|
|
(629,775)
|
Tax withholding on
stock-based compensation awards
|
|
(68,613)
|
|
|
(92,374)
|
Other financing
activities
|
|
546
|
|
|
(586)
|
Net cash used in
financing activities
|
|
(505,372)
|
|
|
(722,735)
|
Effect of exchange rate
changes on cash, cash equivalents and restricted cash
|
|
4
|
|
|
(1,170)
|
Net change in cash,
cash equivalents, and restricted cash
|
|
218,656
|
|
|
(448,633)
|
Cash, cash equivalents,
and restricted cash at beginning of period
|
|
408,966
|
|
|
846,230
|
Cash, cash equivalents,
and restricted cash at end of period
|
$
|
627,622
|
|
$
|
397,597
|
Supplemental
disclosures of cash flow information
|
|
|
|
|
|
Income taxes
paid
|
$
|
54,615
|
|
$
|
227,452
|
Purchases of leasehold
improvements, property and equipment accrued in accounts payable
and accrued liabilities
|
$
|
81,724
|
|
$
|
58,127
|
Acquisition of treasury
stock accrued in accounts payable and accrued
liabilities
|
$
|
15,312
|
|
$
|
5,999
|
CHIPOTLE MEXICAN
GRILL, INC.
SUPPLEMENTAL
FINANCIAL AND OTHER DATA
(dollars in
thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months
ended
|
|
|
Sep.
30,
|
|
Jun.
30,
|
|
Mar.
31,
|
|
Dec.
31,
|
|
Sep.
30,
|
|
|
2023
|
|
2023
|
|
2023
|
|
2022
|
|
2022
|
Number of restaurants
opened
|
|
|
62
|
|
|
47
|
|
|
41
|
|
|
100
|
|
|
43
|
Chipotle permanent
closures
|
|
|
(1)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1)
|
Chipotle
relocations
|
|
|
(2)
|
|
|
(3)
|
|
|
(4)
|
|
|
(3)
|
|
|
(4)
|
Non-Chipotle permanent
closures
|
|
|
(6)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Number of restaurants
at end of period
|
|
|
3,321
|
|
|
3,268
|
|
|
3,224
|
|
|
3,187
|
|
|
3,090
|
Average restaurant
sales
|
|
$
|
2,972
|
|
$
|
2,941
|
|
$
|
2,892
|
|
$
|
2,824
|
|
$
|
2,796
|
Comparable restaurant
sales increase
|
|
|
5.0 %
|
|
|
7.4 %
|
|
|
10.9 %
|
|
|
5.6 %
|
|
|
7.6 %
|
CHIPOTLE MEXICAN GRILL,
INC.
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
The following tables provide a reconciliation of non-GAAP
financial measures presented in the text above to the most directly
comparable financial measures calculated and presented in
accordance with GAAP.
Adjusted net income is net income excluding expenses related to
restaurant and corporate asset impairment, corporate restructuring,
certain legal proceedings, stock-based compensation modification
expense, unrealized gains on equity investments, separation costs,
and certain other costs. Adjusted general and administrative
expense is general and administrative expense excluding corporate
restructuring, certain legal proceedings, stock-based compensation
modification expense, separation costs, and certain other costs.
The adjusted effective income tax rate is the effective income tax
rate adjusted to reflect the after tax impact of non-GAAP
adjustments. Restaurant Level Operating Margin, a non-GAAP
financial measure, is equal to the revenues generated by our
restaurants less their direct operating costs which consist of
food, beverage and packaging, labor, occupancy and other operating
costs. This performance measure primarily includes the costs that
restaurant level managers can directly control and excludes other
costs that are essential to conduct our business. Management uses
restaurant level operating margin as a measure of restaurant
performance. Management believes restaurant level operating margin
is useful to investors in that it highlights trends in our core
business that may not otherwise be apparent to investors when
relying solely on GAAP financial measures. We present these
non-GAAP measures in order to facilitate meaningful evaluation of
our operating performance across periods. These adjustments are
intended to provide greater transparency of underlying performance
and to allow investors to evaluate our business on the same basis
as our management, which uses these non-GAAP measures in evaluating
the company's performance. Our adjusted net income, adjusted
diluted earnings per share, adjusted general and administrative
expenses, adjusted effective income tax rate and restaurant level
operating margin measures may not be comparable to other companies'
adjusted measures. These adjustments are not necessarily indicative
of what our actual financial performance would have been during the
periods presented and should be viewed in addition to, and not as
an alternative to, our results prepared in accordance with GAAP.
Further details regarding these adjustments are included in the
tables below.
CHIPOTLE MEXICAN
GRILL, INC.
RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES
Adjusted Net Income
and Adjusted Diluted Earnings per Share
(in thousands,
except per share amounts)
(unaudited)
|
|
|
|
|
|
|
|
Three months
ended
|
|
September
30,
|
|
2023
|
|
2022
|
Net income
|
$
|
313,217
|
|
$
|
257,138
|
Non-GAAP
adjustments:
|
|
|
|
|
|
Restaurant
costs:
|
|
|
|
|
|
Operating lease asset
impairment and other restaurant costs(1)
|
|
-
|
|
|
698
|
Corporate
Restructuring:
|
|
|
|
|
|
Duplicate rent
expense(2)
|
|
-
|
|
|
1,034
|
Employee related and
other restructuring costs(3)
|
|
1,334
|
|
|
-
|
Stock-based
compensation modification expense(4)
|
|
-
|
|
|
768
|
Separation
costs(5)
|
|
-
|
|
|
3,538
|
Other
adjustments(6)
|
|
-
|
|
|
961
|
Total non-GAAP
adjustments
|
$
|
1,334
|
|
$
|
6,999
|
Tax effect of non-GAAP
adjustments above(7)
|
|
(221)
|
|
|
1,686
|
After tax impact of
non-GAAP adjustments
|
$
|
1,113
|
|
$
|
8,685
|
Adjusted net
income
|
$
|
314,330
|
|
$
|
265,823
|
|
|
|
|
|
|
Diluted
weighted-average number of common shares outstanding
|
|
27,681
|
|
|
27,956
|
Diluted earnings per
share
|
$
|
11.32
|
|
$
|
9.20
|
Adjusted diluted
earnings per share
|
$
|
11.36
|
|
$
|
9.51
|
|
|
|
|
|
|
(1) Operating lease
asset impairment charges and other expenses for restaurants due to
closures, relocations, or underperformance.
|
(2) Duplicate rent
expense for the corporate headquarter relocation and office
consolidation announced in May 2018.
|
(3) Charges for
third-party vendors, stock-based compensation, and employee
severance related to the May 2023 optimization of our
organizational structure.
|
(4) Charges for a
COVID-19 related modification made in December 2020 to our 2018
performance shares.
|
(5) Expenses related to
an employee separation, which consist of incremental compensation
costs net of forfeitures of stock-based compensation.
|
(6) Other adjustments
consist of impairment charges for certain corporate
assets.
|
(7) Adjustments relate
to the tax effect of non-GAAP adjustments, which were determined
based on the nature of the underlying non-GAAP adjustments and
their relevant jurisdictional tax rates.
|
CHIPOTLE MEXICAN
GRILL, INC.
RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES
Adjusted General and
Administrative Expenses
(in
thousands)
(unaudited)
|
|
|
|
|
|
|
|
Three months
ended
|
|
September
30,
|
|
2023
|
|
2022
|
General and
administrative expenses
|
$
|
159,501
|
|
$
|
140,896
|
Non-GAAP
adjustments:
|
|
|
|
|
|
Restructuring
expense(1)
|
|
(1,334)
|
|
|
(1,034)
|
Stock-based
compensation modification expense(2)
|
|
-
|
|
|
(768)
|
Separation
costs(3)
|
|
-
|
|
|
(3,538)
|
Total non-GAAP
adjustments
|
$
|
(1,334)
|
|
$
|
(5,340)
|
Adjusted general and
administrative expenses
|
$
|
158,167
|
|
$
|
135,556
|
|
|
|
|
|
|
(1) For three months
ended September 30, 2023, third-party vendor expense, stock-based
compensation, and employee severance related to the May 2023
optimization of our organizational structure. For the three months
ended September 30, 2022, duplicate rent expense for the corporate
headquarter relocation and office consolidation announced in May
2018.
|
(2) Charges for a
COVID-19 related modification made in December 2020 to our 2018
performance shares.
|
(3) Expenses related to
an employee separation, which consisted of incremental compensation
costs net of forfeitures of stock-based compensation.
|
CHIPOTLE MEXICAN
GRILL, INC.
RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES
Adjusted Effective
Income Tax Rate
(unaudited)
|
|
|
|
|
|
|
|
Three months
ended
|
|
September
30,
|
|
2023
|
|
2022
|
Effective income tax
rate
|
24.2
|
%
|
|
24.4
|
%
|
Tax impact of non-GAAP
adjustments(1)
|
-
|
|
|
(1.0)
|
|
Adjusted effective
income tax rate
|
24.2
|
%
|
|
23.4
|
%
|
|
|
|
|
|
|
(1) Adjustments related
to the tax effect of non-GAAP adjustments, which were determined
based on the nature of the underlying non-GAAP adjustments and
their relevant jurisdictional tax rates.
|
CHIPOTLE MEXICAN
GRILL, INC.
RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES
Restaurant Level
Operating Margin
(in
thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30,
|
|
2023
|
|
Percent of total
revenue
|
|
2022
|
|
Percent of total
revenue
|
Income from
operations
|
$
|
394,950
|
|
16.0
|
%
|
|
$
|
336,253
|
|
15.1
|
%
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative expenses
|
|
159,501
|
|
6.5
|
|
|
|
140,896
|
|
6.3
|
|
Depreciation and
amortization
|
|
78,546
|
|
3.2
|
|
|
|
71,416
|
|
3.2
|
|
Pre-opening
costs
|
|
9,605
|
|
0.4
|
|
|
|
7,618
|
|
0.3
|
|
Impairment, closure
costs, and asset disposals
|
|
7,241
|
|
0.3
|
|
|
|
6,363
|
|
0.3
|
|
Total non-GAAP
Adjustments
|
$
|
254,893
|
|
10.3
|
%
|
|
$
|
226,293
|
|
10.2
|
%
|
Restaurant level
operating margin
|
$
|
649,843
|
|
26.3
|
%
|
|
$
|
562,546
|
|
25.3
|
%
|
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SOURCE Chipotle Mexican Grill, Inc.