RECORD QUARTERLY SALES AND EARNINGS PER SHARE AS
COMPARABLE RESTAURANT SALES INCREASE 7.4% AND MARGINS EXPAND
NEWPORT
BEACH, Calif., July 26,
2023 /PRNewswire/ -- Chipotle Mexican Grill, Inc.
(NYSE: CMG) today reported financial results for its second quarter
ended June 30, 2023.
Second quarter highlights, year over year:
- Total revenue increased 13.6% to $2.5
billion
- Comparable restaurant sales increased 7.4%
- In-restaurant sales increased 15.8%, while digital sales
represented 38.0% of food and beverage revenue
- Operating margin was 17.2%, an increase from 15.3%
- Restaurant level operating margin was 27.5% 1, an
increase of 230 basis points
- Diluted earnings per share was $12.32, a 33.2% increase from $9.25. Excluding a $0.33 after-tax impact from expenses related to
restaurant and corporate level impairment and closure costs and
corporate restructuring, adjusted diluted earnings per share was
$12.65, a 36.0% increase from
$9.30 1
- Opened 47 new restaurants with 40 locations including a
Chipotlane
"Chipotle's second quarter results demonstrate our ability to
drive strong performance by focusing on exceptional food and
exceptional people. Additionally, our investment in our employees,
technology, and innovation in our restaurants along with expanding
access and convenience in North
America and laying the groundwork for international growth,
set us up for long term success." said Brian Niccol, Chairman and CEO, Chipotle.
Results for the three months ended June 30, 2023:
Total revenue in the second quarter was $2.5 billion, an increase of 13.6% compared to
the second quarter of 2022. The increase in total revenue was
driven by a 7.4% increase in comparable restaurant sales and new
restaurant openings. In-restaurant sales in the second quarter
increased 15.8%, compared to the second quarter of 2022, while
digital sales represented 38.0% of total food and beverage
revenue.
We opened 47 new restaurants during the second quarter with 40
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 second quarter were
29.4% of total revenue, a decrease of about 100 basis points
compared to the second quarter of 2022. This decrease results from
the benefit of menu price increases taken in the prior year and
lower avocado prices, which were partially offset by inflation
across several food costs, primarily beef, tortillas, dairy, salsa,
beans and rice.
Restaurant level operating margin in the second quarter was
27.5% compared to 25.2% in the second quarter of 2022. The
improvement was primarily due to the benefit of sales leverage and,
to a lesser extent, lower avocado prices. These decreases were
partially offset by higher inflation across several food costs, and
to a lesser extent, wage inflation.
General and administrative expenses for the second quarter were
$156.5 million on a GAAP basis, or
$153.0 on a non-GAAP basis, excluding
$3.5 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 second quarter
also include $118.8 million of
underlying general and administrative expenses, $29.2 million of non-cash stock compensation, and
$4.6 million of higher
performance-based accruals and payroll taxes on equity vesting and
exercises.
The effective income tax rate for the second quarter was 23.8%
compared to 25.3% in the second quarter of 2022. The decrease in
the effective income tax rate was primarily due to an increase in
tax benefits related to option exercises and equity vesting.
Net income for the second quarter was $341.8 million, or $12.32 per diluted share, compared to
$259.9 million, or $9.25 per diluted share, in the second quarter of
2022. In the second quarter of 2023, excluding the $0.33 after-tax impact from expenses related to
restaurant and corporate level impairment and closure costs and
corporate restructuring, adjusted diluted earnings per share was
$12.65.
During the second quarter, our Board of Directors
approved the investment of up to an additional $100 million, exclusive of commissions, to
repurchase shares of our common stock, subject to market
conditions. Including this repurchase authorization, $294.7 million was available as of
June 30, 2023. The repurchase
authorization may be modified, suspended, or discontinued at any
time. We repurchased $87.6 million of stock at an average price
per share of $1,937.35 during
the second 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 July.
Outlook
For 2023, management is anticipating the following:
- Third quarter comparable restaurant sales growth in the low to
mid-single digit range
- 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 material supply delays do not worsen
- An estimated underlying effective full year tax rate between
25% and 27% before discrete items
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.
- In-restaurant sales represent food and beverage revenue
generated on-premise. In-restaurant sales includes revenue
deferrals associated with Chipotle Rewards.
Conference Call Details
Chipotle will host a conference call on Wednesday, July 26, 2023, at 4:30 PM Eastern time to discuss second quarter
2023 financial results as well as provide a business update for the
third 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: 7029474. 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 3,250 restaurants as of
June 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
July 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 third 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, 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, dairy, 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 availability of
suitable new restaurant sites and the availability of construction
materials and contractors; 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
June 30,
|
|
2023
|
|
2022
|
Food and beverage
revenue
|
$
|
2,497,509
|
|
99.3
|
%
|
|
$
|
2,192,802
|
|
99.1
|
%
|
Delivery service
revenue
|
|
17,292
|
|
0.7
|
|
|
|
20,537
|
|
0.9
|
|
Total
revenue
|
|
2,514,801
|
|
100.0
|
|
|
|
2,213,339
|
|
100.0
|
|
Restaurant operating
costs (exclusive of depreciation and
amortization shown separately below):
|
|
|
|
|
|
|
|
|
|
|
|
Food, beverage and
packaging
|
|
738,664
|
|
29.4
|
|
|
|
673,928
|
|
30.4
|
|
Labor
|
|
611,678
|
|
24.3
|
|
|
|
549,926
|
|
24.8
|
|
Occupancy
|
|
123,897
|
|
4.9
|
|
|
|
113,919
|
|
5.1
|
|
Other operating
costs
|
|
349,707
|
|
13.9
|
|
|
|
317,481
|
|
14.3
|
|
General and
administrative expenses
|
|
156,496
|
|
6.2
|
|
|
|
140,820
|
|
6.4
|
|
Depreciation and
amortization
|
|
78,771
|
|
3.1
|
|
|
|
69,733
|
|
3.2
|
|
Pre-opening
costs
|
|
7,538
|
|
0.3
|
|
|
|
5,253
|
|
0.2
|
|
Impairment, closure
costs, and asset disposals
|
|
16,240
|
|
0.6
|
|
|
|
4,681
|
|
0.2
|
|
Total operating
expenses
|
|
2,082,991
|
|
82.8
|
|
|
|
1,875,741
|
|
84.7
|
|
Income from
operations
|
|
431,810
|
|
17.2
|
|
|
|
337,598
|
|
15.3
|
|
Interest and other
income, net
|
|
16,446
|
|
0.7
|
|
|
|
10,572
|
|
0.5
|
|
Income before income
taxes
|
|
448,256
|
|
17.8
|
|
|
|
348,170
|
|
15.7
|
|
Provision for income
taxes
|
|
(106,466)
|
|
(4.2)
|
|
|
|
(88,228)
|
|
(4.0)
|
|
Net income
|
$
|
341,790
|
|
13.6
|
%
|
|
$
|
259,942
|
|
11.7
|
%
|
Earnings per
share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
12.38
|
|
|
|
|
$
|
9.32
|
|
|
|
Diluted
|
$
|
12.32
|
|
|
|
|
$
|
9.25
|
|
|
|
Weighted-average common
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
27,604
|
|
|
|
|
|
27,905
|
|
|
|
Diluted
|
|
27,747
|
|
|
|
|
|
28,092
|
|
|
|
CHIPOTLE MEXICAN
GRILL, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(in thousands,
except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
June 30,
|
|
2023
|
|
2022
|
Food and beverage
revenue
|
$
|
4,848,518
|
|
99.3
|
%
|
|
$
|
4,191,758
|
|
99.0
|
%
|
Delivery service
revenue
|
|
34,863
|
|
0.7
|
|
|
|
42,120
|
|
1.0
|
|
Total
revenue
|
|
4,883,381
|
|
100.0
|
|
|
|
4,233,878
|
|
100.0
|
|
Restaurant operating
costs (exclusive of depreciation and
amortization shown separately below):
|
|
|
|
|
|
|
|
|
|
|
|
Food, beverage and
packaging
|
|
1,431,223
|
|
29.3
|
|
|
|
1,300,854
|
|
30.7
|
|
Labor
|
|
1,195,472
|
|
24.5
|
|
|
|
1,081,866
|
|
25.6
|
|
Occupancy
|
|
245,828
|
|
5.0
|
|
|
|
225,951
|
|
5.3
|
|
Other operating
costs
|
|
712,913
|
|
14.6
|
|
|
|
648,176
|
|
15.3
|
|
General and
administrative expenses
|
|
304,836
|
|
6.2
|
|
|
|
288,222
|
|
6.8
|
|
Depreciation and
amortization
|
|
155,356
|
|
3.2
|
|
|
|
141,398
|
|
3.3
|
|
Pre-opening
costs
|
|
13,736
|
|
0.3
|
|
|
|
10,601
|
|
0.3
|
|
Impairment, closure
costs, and asset disposals
|
|
24,601
|
|
0.5
|
|
|
|
8,991
|
|
0.2
|
|
Total operating
expenses
|
|
4,083,965
|
|
83.6
|
|
|
|
3,706,059
|
|
87.5
|
|
Income from
operations
|
|
799,416
|
|
16.4
|
|
|
|
527,819
|
|
12.5
|
|
Interest and other
income, net
|
|
25,395
|
|
0.5
|
|
|
|
10,359
|
|
0.2
|
|
Income before income
taxes
|
|
824,811
|
|
16.9
|
|
|
|
538,178
|
|
12.7
|
|
Provision for income
taxes
|
|
(191,377)
|
|
(3.9)
|
|
|
|
(119,942)
|
|
(2.8)
|
|
Net income
|
$
|
633,434
|
|
13.0
|
%
|
|
$
|
418,236
|
|
9.9
|
%
|
Earnings per
share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
22.94
|
|
|
|
|
$
|
14.95
|
|
|
|
Diluted
|
$
|
22.81
|
|
|
|
|
$
|
14.83
|
|
|
|
Weighted-average common
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
27,614
|
|
|
|
|
|
27,974
|
|
|
|
Diluted
|
|
27,768
|
|
|
|
|
|
28,196
|
|
|
|
CHIPOTLE MEXICAN
GRILL, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(in thousands,
except per share data)
|
|
|
|
|
|
|
|
June
30,
|
|
December
31,
|
|
2023
|
|
2022
|
|
(unaudited)
|
|
|
Assets
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
504,866
|
|
$
|
384,000
|
Accounts receivable,
net
|
|
60,985
|
|
|
106,880
|
Inventory
|
|
36,004
|
|
|
35,668
|
Prepaid expenses and
other current assets
|
|
103,422
|
|
|
86,412
|
Income tax
receivable
|
|
-
|
|
|
47,741
|
Investments
|
|
851,142
|
|
|
515,136
|
Total current
assets
|
|
1,556,419
|
|
|
1,175,837
|
Leasehold improvements,
property and equipment, net
|
|
2,021,964
|
|
|
1,951,147
|
Long-term
investments
|
|
430,762
|
|
|
388,055
|
Restricted
cash
|
|
25,106
|
|
|
24,966
|
Operating lease
assets
|
|
3,433,719
|
|
|
3,302,402
|
Other assets
|
|
62,526
|
|
|
63,158
|
Goodwill
|
|
21,939
|
|
|
21,939
|
Total assets
|
$
|
7,552,435
|
|
$
|
6,927,504
|
Liabilities and
shareholders' equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
$
|
162,041
|
|
$
|
184,566
|
Accrued payroll and
benefits
|
|
177,475
|
|
|
170,456
|
Accrued
liabilities
|
|
141,291
|
|
|
147,539
|
Unearned
revenue
|
|
158,959
|
|
|
183,071
|
Current operating
lease liabilities
|
|
244,061
|
|
|
236,248
|
Income tax
payable
|
|
98,423
|
|
|
-
|
Total current
liabilities
|
|
982,250
|
|
|
921,880
|
Long-term operating
lease liabilities
|
|
3,643,931
|
|
|
3,495,162
|
Deferred income tax
liabilities
|
|
106,440
|
|
|
98,623
|
Other
liabilities
|
|
52,928
|
|
|
43,816
|
Total
liabilities
|
|
4,785,549
|
|
|
4,559,481
|
Shareholders'
equity:
|
|
|
|
|
|
Preferred stock, $0.01
par value, 600,000 shares authorized, no shares issued as of June
30,
2023 and December 31, 2022, respectively
|
|
-
|
|
|
-
|
Common stock, $0.01
par value, 230,000 shares authorized, 37,459 and 37,320 shares
issued as
of June 30, 2023 and December 31, 2022, respectively
|
|
375
|
|
|
373
|
Additional paid-in
capital
|
|
1,880,933
|
|
|
1,829,304
|
Treasury stock, at
cost, 9,863 and 9,693 common shares as of June 30, 2023 and
December 31,
2022, respectively
|
|
(4,569,152)
|
|
|
(4,282,014)
|
Accumulated other
comprehensive loss
|
|
(6,952)
|
|
|
(7,888)
|
Retained
earnings
|
|
5,461,682
|
|
|
4,828,248
|
Total shareholders'
equity
|
|
2,766,886
|
|
|
2,368,023
|
Total liabilities and
shareholders' equity
|
$
|
7,552,435
|
|
$
|
6,927,504
|
CHIPOTLE MEXICAN
GRILL, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in
thousands)
(unaudited)
|
|
|
|
|
|
|
|
Six months
ended
|
|
June
30,
|
|
2023
|
|
2022
|
Operating
activities
|
|
|
|
|
|
Net income
|
$
|
633,434
|
|
$
|
418,236
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
|
155,356
|
|
|
141,398
|
Deferred income tax
provision
|
|
7,827
|
|
|
(15,537)
|
Impairment, closure
costs, and asset disposals
|
|
24,173
|
|
|
8,851
|
Provision for credit
losses
|
|
312
|
|
|
(876)
|
Stock-based
compensation expense
|
|
50,756
|
|
|
52,221
|
Other
|
|
(9,237)
|
|
|
(11,909)
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
|
44,027
|
|
|
12,353
|
Inventory
|
|
(313)
|
|
|
3,320
|
Prepaid expenses and
other current assets
|
|
(21,365)
|
|
|
948
|
Operating lease
assets
|
|
121,363
|
|
|
112,505
|
Other
assets
|
|
3,455
|
|
|
(3,014)
|
Accounts
payable
|
|
(10,783)
|
|
|
(2,972)
|
Accrued payroll and
benefits
|
|
7,597
|
|
|
(583)
|
Accrued
liabilities
|
|
(66)
|
|
|
(22,293)
|
Unearned
revenue
|
|
(19,894)
|
|
|
(20,062)
|
Income tax
payable/receivable
|
|
146,177
|
|
|
(3,832)
|
Operating lease
liabilities
|
|
(100,794)
|
|
|
(100,024)
|
Other long-term
liabilities
|
|
5,521
|
|
|
958
|
Net cash provided by
operating activities
|
|
1,037,546
|
|
|
569,688
|
Investing
activities
|
|
|
|
|
|
Purchases of leasehold
improvements, property and equipment
|
|
(257,601)
|
|
|
(196,495)
|
Purchases of
investments
|
|
(590,656)
|
|
|
(195,242)
|
Maturities of
investments
|
|
220,565
|
|
|
142,540
|
Net cash used in
investing activities
|
|
(627,692)
|
|
|
(249,197)
|
Financing
activities
|
|
|
|
|
|
Acquisition of treasury
stock
|
|
(221,754)
|
|
|
(521,910)
|
Tax withholding on
stock-based compensation awards
|
|
(67,474)
|
|
|
(91,905)
|
Other financing
activities
|
|
115
|
|
|
(588)
|
Net cash used in
financing activities
|
|
(289,113)
|
|
|
(614,403)
|
Effect of exchange rate
changes on cash, cash equivalents and restricted cash
|
|
265
|
|
|
(490)
|
Net change in cash,
cash equivalents, and restricted cash
|
|
121,006
|
|
|
(294,402)
|
Cash, cash equivalents,
and restricted cash at beginning of period
|
|
408,966
|
|
|
846,230
|
Cash, cash equivalents,
and restricted cash at end of period
|
$
|
529,972
|
|
$
|
551,828
|
Supplemental
disclosures of cash flow information
|
|
|
|
|
|
Income taxes
paid
|
$
|
33,252
|
|
$
|
139,177
|
Purchases of leasehold
improvements, property and equipment accrued in accounts payable
and
accrued liabilities
|
$
|
55,904
|
|
$
|
61,072
|
Acquisition of treasury
stock accrued in accounts payable and accrued
liabilities
|
$
|
2,406
|
|
$
|
6,999
|
CHIPOTLE MEXICAN
GRILL, INC.
SUPPLEMENTAL
FINANCIAL AND OTHER DATA
(dollars in
thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months
ended
|
|
|
Jun.
30,
|
|
Mar.
31,
|
|
Dec.
31,
|
|
Sep.
30,
|
|
Jun.
30,
|
|
|
2023
|
|
2023
|
|
2022
|
|
2022
|
|
2022
|
Number of restaurants
opened
|
|
|
47
|
|
|
41
|
|
|
100
|
|
|
43
|
|
|
42
|
Restaurant
closures
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1)
|
|
|
(1)
|
Restaurant
relocations
|
|
|
(3)
|
|
|
(4)
|
|
|
(3)
|
|
|
(4)
|
|
|
(3)
|
Number of restaurants
at end of period
|
|
|
3,268
|
|
|
3,224
|
|
|
3,187
|
|
|
3,090
|
|
|
3,052
|
Average restaurant
sales
|
|
$
|
2,941
|
|
$
|
2,892
|
|
$
|
2,824
|
|
$
|
2,796
|
|
$
|
2,747
|
Comparable restaurant
sales increase
|
|
|
7.4 %
|
|
|
10.9 %
|
|
|
5.6 %
|
|
|
7.6 %
|
|
|
10.1 %
|
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
|
|
June
30,
|
|
2023
|
|
2022
|
Net income
|
$
|
341,790
|
|
$
|
259,942
|
Non-GAAP
adjustments:
|
|
|
|
|
|
Impairment and exit
costs:
|
|
|
|
|
|
Restaurant asset
impairment and other restaurant exit costs(1)
|
|
4,765
|
|
|
309
|
Corporate asset
impairment (2)
|
|
3,735
|
|
|
-
|
Corporate
Restructuring:
|
|
|
|
|
|
Duplicate rent
expense(3)
|
|
-
|
|
|
856
|
Employee related and
other restructuring costs(4)
|
|
3,495
|
|
|
-
|
Legal
proceedings(5)
|
|
-
|
|
|
6,798
|
Stock-based
compensation modification expense(6)
|
|
-
|
|
|
2,770
|
Unrealized gain on
equity investments(7)
|
|
-
|
|
|
(10,410)
|
Total non-GAAP
adjustments
|
$
|
11,995
|
|
$
|
323
|
Tax effect of non-GAAP
adjustments above(8)
|
|
(2,891)
|
|
|
920
|
After tax impact of
non-GAAP adjustments
|
$
|
9,104
|
|
$
|
1,243
|
Adjusted net
income
|
$
|
350,894
|
|
$
|
261,185
|
|
|
|
|
|
|
Diluted
weighted-average number of common shares outstanding
|
|
27,747
|
|
|
28,092
|
Diluted earnings per
share
|
$
|
12.32
|
|
$
|
9.25
|
Adjusted diluted
earnings per share
|
$
|
12.65
|
|
$
|
9.30
|
|
|
|
|
|
|
(1) Operating lease
asset and leasehold improvements, property, plant and equipment
impairment charges and other expenses for
restaurants due to closures, relocations, or
underperformance.
|
(2) Operating lease
asset and leasehold improvements, property, plant and equipment
impairment charges and other expenses for
offices or other corporate assets.
|
(3) Duplicate rent
expense for the corporate headquarter relocation and office
consolidation announced in May 2018.
|
(4) Charges for
employee severance, stock modifications and third-party vendors
related to the May 2023 optimization of our
organizational structure.
|
(5) Charges for
estimated settlements for distinct legal matters that exceeded or
are expected to exceed typical costs for these types of
legal proceedings.
|
(6) Charges for a
COVID-19 related modification made in December 2020 to our 2018
performance shares.
|
(7) Unrealized gain on
equity investments based on a subsequent investment by an unrelated
party in one of our investees, which
subsequent investment represents an observable price change in an
orderly transaction for a similar investment of the same
issuer.
|
(8) 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
|
|
June
30,
|
|
2023
|
|
2022
|
General and
administrative expenses
|
$
|
156,496
|
|
$
|
140,820
|
Non-GAAP
adjustments:
|
|
|
|
|
|
Restructuring
expense(1)
|
|
(3,495)
|
|
|
(856)
|
Legal
proceedings(2)
|
|
-
|
|
|
(6,798)
|
Stock-based
compensation modification expense(3)
|
|
-
|
|
|
(2,770)
|
Total non-GAAP
adjustments
|
$
|
(3,495)
|
|
$
|
(10,424)
|
Adjusted general and
administrative expenses
|
$
|
153,001
|
|
$
|
130,396
|
|
|
|
|
|
|
(1) For three months
ended June 30, 2023, costs for employee severance, stock
modifications and third party related to the May 2023
optimization of our organizational structure. For the three months
ended June 30, 2022, duplicate rent expense for the corporate
headquarter relocation and office consolidation announced in May
2018.
|
(2) Charges for
estimated settlements for distinct legal matters that exceeded or
are expected to exceed typical costs for these types of
legal proceedings.
|
(3) Charges for a
COVID-19 related modification made in December 2020 to our 2018
performance shares.
|
CHIPOTLE MEXICAN
GRILL, INC. RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
|
|
Adjusted Effective
Income Tax Rate (unaudited)
|
|
|
|
|
|
|
|
Three months
ended
|
|
June
30,
|
|
2023
|
|
2022
|
Effective income tax
rate
|
23.8
|
%
|
|
25.3
|
%
|
Tax impact of non-GAAP
adjustments(1)
|
-
|
|
|
(0.2)
|
|
Adjusted effective
income tax rate
|
23.8
|
%
|
|
25.1
|
%
|
|
|
|
|
|
|
(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
June 30,
|
|
2023
|
|
Percent of total
revenue
|
|
2022
|
|
Percent of total
revenue
|
Income from
operations
|
$
|
431,810
|
|
17.2
|
%
|
|
$
|
337,598
|
|
15.3
|
%
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative expenses
|
|
156,496
|
|
6.2
|
|
|
|
140,820
|
|
6.4
|
|
Depreciation and
amortization
|
|
78,771
|
|
3.1
|
|
|
|
69,733
|
|
3.2
|
|
Pre-opening
costs
|
|
7,538
|
|
0.3
|
|
|
|
5,253
|
|
0.2
|
|
Impairment, closure
costs, and asset disposals
|
|
16,240
|
|
0.6
|
|
|
|
4,681
|
|
0.2
|
|
Total non-GAAP
Adjustments
|
$
|
259,045
|
|
10.3
|
%
|
|
$
|
220,487
|
|
10.0
|
%
|
Restaurant level
operating margin
|
$
|
690,855
|
|
27.5
|
%
|
|
$
|
558,085
|
|
25.2
|
%
|
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SOURCE Chipotle Mexican Grill, Inc.