CHIPOTLE ANNOUNCES SECOND QUARTER 2022 RESULTS

OPERATING INCOME INCREASES 37.5% AND COMPARABLE RESTAURANT SALES INCREASE 10.1% AS MARGINS EXPAND

NEWPORT BEACH, Calf., July 26, 2022 /PRNewswire/ -- Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its second quarter ended June 30, 2022.

Second quarter highlights, year over year:

• Total revenue increased 17.0% to $2.2 billion

• Comparable restaurant sales increased 10.1%

• In-restaurant sales increased 35.9%, while digital sales¹ represented 39.0% of food and beverage revenue

• Operating margin was 15.3%, an increase from 13.0%

• Restaurant level operating margin was 25.2% ², an increase of 70 basis points

• Diluted earnings per share was $9.25, a 40.2% increase from $6.60. Adjusted diluted earnings per share, which excluded a $0.05 after-tax impact from expenses related to certain legal proceedings, expenses related to the 2018 performance share COVID-19 related modification, corporate restructuring costs, restaurant asset impairment and closure costs, offset by an unrealized gain on investments was $9.30, a 24.7% increase from $7.46 ²

• Opened 42 new restaurants with 32 locations including a Chipotlane

"We are pleased with our second quarter performance during a period of inflation and consumer uncertainty," said Brian Niccol, Chairman and CEO, Chipotle. "Our pricing power and value proposition remain strong as our culinary and food with integrity commitment continues to be a key point of differentiation."

Results for the three months ended June 30, 2022:

Total revenue in the second quarter was $2.2 billion, an increase of 17.0% compared to the second quarter of 2021. The increase in total revenue was driven by a 10.1% increase in comparable restaurant sales and new restaurant openings. Our in-restaurant sales increased 35.9% in the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, while digital sales represented 39.0% of total food and beverage revenue.

We opened 42 new restaurants during the second quarter with 32 locations including a Chipotlane. These formats continue to perform very 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 remained flat at 30.4% of total revenue compared to the second quarter of 2021. In the second quarter of 2022 the benefit of menu price increases was offset by inflation across the menu primarily due to higher costs for avocados, packaging, dairy, beef and chicken.

Restaurant level operating margin was 25.2%, an increase from 24.5% in the second quarter of 2021. The increase was primarily due to the benefit of menu price increases and, to a lesser extent, lower delivery fees associated with a lower volume of delivery transactions, partially offset by higher food costs and increases in hourly wages.

General and administrative expenses for the second quarter were $140.8 million on a GAAP basis, or $130.4 million² on a non-GAAP basis, excluding $6.8 million of certain legal proceedings, $2.8 million for a COVID-19 related modification to our 2018 performance shares made in December 2020, and $0.9 million related to transformation expenses. GAAP and non-GAAP general and administrative expenses for the second quarter of 2022 also include $105.8 million of underlying general and administrative expenses, and $25.0 million of non-cash stock compensation.

The GAAP effective income tax rate was 25.3% for the second quarter, which increased from 23.7% in the second quarter of 2021, primarily due to a decrease in tax benefits related to option exercises and equity vesting.

Net income for the second quarter was $259.9 million, or $9.25 per diluted share, an increase from $188.0 million, or $6.60 per diluted share, in the second quarter of 2021. Excluding the after-tax impact of expenses related to certain legal proceedings, modification expenses related to our 2018 performance shares, corporate restructuring, restaurant asset impairment and closure costs, offset by an unrealized gain on investments, adjusted net income was $261.2 million² and adjusted diluted earnings per share was $9.30².

During the second 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, $319.7 million was available as of June 30, 2022. The repurchase authorization may be modified, suspended, or discontinued at any time. We repurchased $261.1 million of stock at an average price per share of $1,350 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 2022, management is anticipating the following:

• Third quarter comparable restaurant sales growth, including planned price increases in August, in the mid to high-single digits.

• Between 235 to 250 new restaurant openings (including 10 to 15 relocations to add a Chipotlane), which assumes construction, permit and material supply delays don't 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 includes 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 Tuesday, July 26, 2022, at 4:30 PM Eastern time to discuss second quarter 2022 financial results as well as provide a business update for the third quarter 2022.

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: 8631266. 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 3,000 restaurants as of June 30, 2022, 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. Chipotle is ranked on the Fortune 500 and is recognized on the 2022 list for Fortune's Most Admired Companies. With over 100,000 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, 2022 conference call are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements about our goals for number of future Chipotle restaurants, restaurants with Chipotlanes and rate of expansion, future comparable restaurant sales, future estimated tax rates, future cash flow, and future long-term prospects. We use words such as "anticipate", "believe", "could", "should", "may", "approximately", "estimate", "expect", "potential", "intend", "project", "encouraged", "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: uncertainty regarding the duration and severity of the ongoing COVID-19 pandemic, the resurgence of COVID-19 infections, the circulation of novel variants of COVID-19 and its ultimate impact on our business, including supply chain disruptions and difficulties in acquiring restaurant equipment, impact on guest traffic, restaurant sales and operating costs and the ability of our third-party suppliers and business partners to fulfill their responsibilities and commitments; 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, avocados and packaging); 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 related to our acceptance of electronic payments or electronic processing of confidential customer or employee information, including through our digital app; 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 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 overall consumer spending (including as a result of the increase in inflation and higher gas prices), or the inability to increase menu prices or realize the benefits of menu price increases; risks associated with our increased focus on our digital business, including risks arising from our reliance on third party delivery services; risks relating to litigation, including possible governmental actions related to food safety incidents and potential class action litigation regarding employment 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	Refer to definition of digital sales below. We updated the definition of digital sales in the first quarter of 2022 to include revenue deferrals related to Chipotle Rewards. We made this change to allow for a reconciliation to total food and beverage revenue as we now present In-restaurant sales.
2	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,
	2022						2021
Food and beverage revenue	$	2,192,802		99.1	%		$	1,869,365		98.8	%
Delivery service revenue		20,537		0.9				23,173		1.2
Total revenue		2,213,339		100.0				1,892,538		100.0
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Food, beverage and packaging		673,928		30.4				574,478		30.4
Labor		549,926		24.8				464,506		24.5
Occupancy		113,919		5.1				103,430		5.5
Other operating costs		317,481		14.3				287,242		15.2
General and administrative expenses		140,820		6.4				146,044		7.7
Depreciation and amortization		69,733		3.2				62,082		3.3
Pre-opening costs		5,253		0.2				4,965		0.3
Impairment, closure costs, and asset disposals		4,681		0.2				4,266		0.2
Total operating expenses		1,875,741		84.7				1,647,013		87.0
Income from operations		337,598		15.3				245,525		13.0
Interest and other income (expense), net		10,572		0.5				851		-
Income before income taxes		348,170		15.7				246,376		13.0
Provision for income taxes		(88,228)		(4.0)				(58,402)		(3.1)
Net income	$	259,942		11.7	%		$	187,974		9.9	%
Earnings per share:
Basic	$	9.32					$	6.68
Diluted	$	9.25					$	6.60
Weighted-average common shares outstanding:
Basic		27,905						28,134
Diluted		28,092						28,501

CHIPOTLE MEXICAN GRILL, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) (unaudited)
	Six months ended June 30,
	2022						2021
Food and beverage revenue	$	4,191,758		99.0	%		$	3,585,355		98.7	%
Delivery service revenue		42,120		1.0				48,758		1.3
Total revenue		4,233,878		100.0				3,634,113		100.0
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Food, beverage and packaging		1,300,854		30.7				1,097,149		30.2
Labor		1,081,866		25.6				898,175		24.7
Occupancy		225,951		5.3				205,199		5.6
Other operating costs		648,176		15.3				581,952		16.0
General and administrative expenses		288,222		6.8				301,147		8.3
Depreciation and amortization		141,398		3.3				125,204		3.4
Pre-opening costs		10,601		0.3				8,386		0.2
Impairment, closure costs, and asset disposals		8,991		0.2				9,934		0.3
Total operating expenses		3,706,059		87.5				3,227,146		88.8
Income from operations		527,819		12.5				406,967		11.2
Interest and other income (expense), net		10,359		0.2				(1,317)		(0.0)
Income before income taxes		538,178		12.7				405,650		11.2
Provision for income taxes		(119,942)		(2.8)				(90,575)		(2.5)
Net income	$	418,236		9.9	%		$	315,075		8.7	%
Earnings per share:
Basic	$	14.95					$	11.20
Diluted	$	14.83					$	11.04
Weighted-average common shares outstanding:
Basic		27,974						28,130
Diluted		28,196						28,542

CHIPOTLE MEXICAN GRILL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share data)
	June 30,			December 31,
	2022			2021
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	520,933		$	815,374
Accounts receivable, net		83,636			99,599
Inventory		29,456			32,826
Prepaid expenses and other current assets		73,716			78,756
Income tax receivable		97,874			94,064
Investments		240,684			260,945
Total current assets		1,046,299			1,381,564
Leasehold improvements, property and equipment, net		1,813,348			1,769,278
Long-term investments		359,911			274,311
Restricted cash		30,895			30,856
Operating lease assets		3,209,934			3,118,294
Other assets		63,010			56,716
Goodwill		21,939			21,939
Total assets	$	6,545,336		$	6,652,958
Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	158,581		$	163,161
Accrued payroll and benefits		161,052			162,405
Accrued liabilities		148,614			173,052
Unearned revenue		132,446			156,351
Current operating lease liabilities		230,930			218,713
Total current liabilities		831,623			873,682
Long-term operating lease liabilities		3,393,423			3,301,601
Deferred income tax liabilities		126,239			141,765
Other liabilities		39,852			38,536
Total liabilities		4,391,137			4,355,584
Shareholders' equity:
Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of June 30, 2022 and December 31, 2021, respectively		-			-
Common stock, $0.01 par value, 230,000 shares authorized, 37,284 and 37,132 shares issued as of June 30, 2022 and December 31, 2021, respectively		373			371
Additional paid-in capital		1,782,303			1,729,312
Treasury stock, at cost, 9,480 and 9,052 common shares as of June 30, 2022 and December 31, 2021, respectively		(3,969,221)			(3,356,102)
Accumulated other comprehensive loss		(6,639)