SEC Form 10-Q filed by Chipotle Mexican Grill Inc.

10/29/24 7:10:08 PM ET

$CMG

Restaurants

Consumer Discretionary

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

__________________________________________________________________________

FORM 10-Q

__________________________________________________________________________


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-32731

__________________________________________________________________________

CHIPOTLE MEXICAN GRILL, INC.

(Exact name of registrant as specified in its charter)

__________________________________________________________________________


Delaware			84-1219301
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification No.)

610 Newport Center Drive, Suite 1100 Newport Beach, CA			92660
(Address of Principal Executive Offices)			(Zip Code)

Registrant’s telephone number, including area code: (949) 524-4000

__________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	CMG	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer

o Accelerated filer

o Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

As of October 25, 2024, there were 1,362,593 shares of the registrant’s common stock, par value of $0.01 per share outstanding.

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TABLE OF CONTENTS


	PART I
Item 1	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Income and Comprehensive Income	2
	Condensed Consolidated Statements of Shareholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Condensed Consolidated Financial Statements	5
	Note 1 - Basis of Presentation and Update to Accounting Policies	5
	Note 2 - Recently Issued Accounting Standards	5
	Note 3 - Revenue Recognition	6
	Note 4 - Fair Value Measurements	7
	Note 5 - Equity Investments	9
	Note 6 - Shareholders' Equity	9
	Note 7 - Stock-Based Compensation	10
	Note 8 - Income Taxes	11
	Note 9 - Leases	11
	Note 10 - Earnings Per Share	12
	Note 11 - Commitments and Contingencies	12
	Note 12 - Debt	13
	Note 13 - Related Party Transactions	13
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4	Controls and Procedures	21
	PART II
Item 1	Legal Proceedings	21
Item 1A	Risk Factors	22
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3	Defaults upon Senior Securities	22
Item 4	Mine Safety Disclosures	22
Item 5	Other Information	22
Item 6	Exhibits	23
	Signatures	24

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PART I

ITEM 1. FINANCIAL STATEMENTS

CHIPOTLE MEXICAN GRILL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)


	September 30, 2024		December 31, 2023
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	698,547	$	560,609
Accounts receivable, net	93,202		115,535
Inventory	49,848		39,309
Prepaid expenses and other current assets	87,896		117,462
Income tax receivable	82,087		52,960
Investments	668,676		734,838
Total current assets	1,680,256		1,620,713
Leasehold improvements, property and equipment, net	2,320,395		2,170,038
Long-term investments	892,487		564,488
Restricted cash	27,969		25,554
Operating lease assets	3,954,689		3,578,548
Other assets	113,935		63,082
Goodwill	21,939		21,939
Total assets	$	9,011,670	$	8,044,362
Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	221,301	$	197,646
Accrued payroll and benefits	184,367		227,537
Accrued liabilities	181,354		147,688
Unearned revenue	180,288		209,680
Current operating lease liabilities	270,574		248,074

Total current liabilities	1,037,884		1,030,625
Commitments and contingencies (Note 11)
Long-term operating lease liabilities	4,212,868		3,803,551
Deferred income tax liabilities	79,519		89,109
Other liabilities	67,501		58,870
Total liabilities	5,397,772		4,982,155
Shareholders' equity:
Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of September 30, 2024 and December 31, 2023, respectively	-		-
Common stock, $0.01 par value, 11,500,000 shares authorized, 1,363,639 and 1,874,139 shares issued as of September 30, 2024 and December 31, 2023, respectively	13,635		18,741
Additional paid-in capital	2,030,178		1,937,794
Treasury stock, at cost, 0 and 502,843 common shares as of September 30, 2024 and December 31, 2023, respectively	-		(4,944,656)
Accumulated other comprehensive loss	(7,440)		(6,657)
Retained earnings	1,577,525		6,056,985
Total shareholders' equity	3,613,898		3,062,207
Total liabilities and shareholders' equity	$	9,011,670	$	8,044,362

See accompanying notes to condensed consolidated financial statements.

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CHIPOTLE MEXICAN GRILL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(in thousands, except per share data)

(unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Food and beverage revenue	$	2,778,034	$	2,456,039	$	8,417,396	$	7,304,557
Delivery service revenue	15,542		15,909		51,147		50,772
Total revenue	2,793,576		2,471,948		8,468,543		7,355,329
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Food, beverage and packaging	855,515		734,186		2,508,264		2,165,409
Labor	696,847		616,282		2,072,924		1,811,754
Occupancy	142,570		126,269		416,932		372,097
Other operating costs	386,463		345,368		1,156,992		1,058,281
General and administrative expenses	126,614		159,501		506,267		464,337
Depreciation and amortization	84,349		78,546		251,154		233,902
Pre-opening costs	12,786		9,605		28,992		23,341
Impairment, closure costs, and asset disposals	15,176		7,241		26,417		31,842
Total operating expenses	2,320,320		2,076,998		6,967,942		6,160,963
Income from operations	473,256		394,950		1,500,601		1,194,366
Interest and other income, net	29,307		18,392		70,532		43,787
Income before income taxes	502,563		413,342		1,571,133		1,238,153
Provision for income taxes	115,175		100,125		368,787		291,502
Net income	$	387,388	$	313,217	$	1,202,346	$	946,651
Earnings per share:
Basic	$	0.28	$	0.23	$	0.88	$	0.69
Diluted	$	0.28	$	0.23	$	0.87	$	0.68
Weighted-average common shares outstanding:
Basic	1,367,038		1,377,525		1,370,671		1,379,640
Diluted	1,374,605		1,384,062		1,379,099		1,386,934
Other comprehensive income/(loss), net of income taxes:
Foreign currency translation adjustments	$	1,074	$	(1,128)	$	(783)	$	(192)
Comprehensive income	$	388,462	$	312,089	$	1,201,563	$	946,459

See accompanying notes to condensed consolidated financial statements.

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CHIPOTLE MEXICAN GRILL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

(unaudited)


	Common Stock					Treasury Stock
	Shares	Amount		Additional Paid-In Capital		Shares	Amount		Retained Earnings		Accumulated Other Comprehensive Loss		Total
Balance, December 31, 2022	1,865,992	$	18,660	$	1,811,017	484,651	$	(4,282,014)	$	4,828,248	$	(7,888)	$	2,368,023
Stock-based compensation	-	-		20,670		-	-		-		-		20,670
Stock plan transactions and other	4,982	50		(340)		-	-		-		-		(290)
Repurchase of common stock	-	-		-		6,241	(198,819)		-		-		(198,819)
Net income	-	-		-		-	-		291,644		-		291,644
Other comprehensive income/(loss), net of income taxes	-	-		-		-	-		-		457		457
Balance, March 31, 2023	1,870,974	$	18,710	$	1,831,347	490,892	$	(4,480,833)	$	5,119,892	$	(7,431)	$	2,481,685
Stock-based compensation	-	-		31,467		-	-		-		-		31,467
Stock plan transactions and other	1,993	20		(236)		-	-		-		-		(216)
Repurchase of common stock	-	-		-		2,271	(88,319)		-		-		(88,319)
Net income	-	-		-		-	-		341,790		-		341,790
Other comprehensive income/(loss), net of income taxes	-	-		-		-	-		-		479		479
Balance, June 30, 2023	1,872,967	$	18,730	$	1,862,578	493,163	$	(4,569,152)	$	5,461,682	$	(6,952)	$	2,766,886
Stock-based compensation	-	-		36,614		-	-		-		-		36,614
Stock plan transactions and other	371	3		318		-	-		-		-		321
Repurchase of common stock	-	-		-		5,940	(229,596)		-		-		(229,596)
Net income	-	-		-		-	-		313,217		-		313,217
Other comprehensive income/(loss), net of income taxes	-	-		-		-	-		-		(1,128)		(1,128)
Balance, September 30, 2023	1,873,338	$	18,733	$	1,899,510	499,103	$	(4,798,748)	$	5,774,899	$	(8,080)	$	2,886,314

Balance, December 31, 2023	1,874,139	$	18,741	$	1,937,794	502,843	$	(4,944,656)	$	6,056,985	$	(6,657)	$	3,062,207
Stock-based compensation	-	-		36,681		-	-		-		-		36,681
Stock plan transactions and other	4,002	40		2,070		-	-		-		-		2,110
Repurchase of common stock	-	-		-		1,935	(97,663)		-		-		(97,663)
Net income	-	-		-		-	-		359,287		-		359,287
Other comprehensive income/(loss), net of income taxes	-	-		-		-	-		-		(1,293)		(1,293)
Balance, March 31, 2024	1,878,141	$	18,781	$	1,976,545	504,778	$	(5,042,319)	$	6,416,272	$	(7,950)	$	3,361,329
Stock-based compensation	-	-		46,160		-	-		-		-		46,160
Stock plan transactions and other	397	4		1,097		-	-		-		-		1,101
Repurchase of common stock	-	-		-		2,388	(151,877)		-		-		(151,877)
Retirement of treasury stock	(507,166)	(5,072)		-		(507,166)	5,194,196		(5,189,124)		-		-
Net income	-	-		-		-	-		455,671		-		455,671
Other comprehensive income/(loss), net of income taxes	-	-		-		-	-		-		(564)		(564)
Balance, June 30, 2024	1,371,372	$	13,713	$	2,023,802	-	$	-	$	1,682,819	$	(8,514)	$	3,711,820
Stock-based compensation	-	-		5,262		-	-		-		-		5,262
Stock plan transactions and other	1,222	12		1,114		-	-		-		-		1,126
Repurchase of common stock	(8,955)	(90)		-		-	-		(492,682)		-		(492,772)
Net income	-	-		-		-	-		387,388		-		387,388
Other comprehensive income/(loss), net of income taxes	-	-		-		-	-		-		1,074		1,074
Balance, September 30, 2024	1,363,639	$	13,635	$	2,030,178	-	$	-	$	1,577,525	$	(7,440)	$	3,613,898

See accompanying notes to condensed consolidated financial statements.

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CHIPOTLE MEXICAN GRILL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Nine months ended September 30,
	2024		2023
Operating activities
Net income	$	1,202,346	$	946,651
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	251,154		233,902
Deferred income tax provision	(9,599)		12,465
Impairment, closure costs, and asset disposals	24,139		30,536
Provision for credit losses	(289)		565
Stock-based compensation expense	85,903		86,557
Other	2,459		(17,272)
Changes in operating assets and liabilities:
Accounts receivable	22,069		33,666
Inventory	(10,540)		(4,508)
Prepaid expenses and other current assets	21,944		(23,494)
Operating lease assets	211,172		185,056
Other assets	(17,990)		(6,939)
Accounts payable	22,290		4,886
Accrued payroll and benefits	(42,774)		(14,902)
Accrued liabilities	23,488		1,882
Unearned revenue	(22,745)		(21,190)
Income tax payable/receivable	(29,100)		220,427
Operating lease liabilities	(155,770)		(156,180)
Other long-term liabilities	149		5,910
Net cash provided by operating activities	1,578,306		1,518,018
Investing activities
Purchases of leasehold improvements, property and equipment	(420,718)		(388,801)
Purchases of investments	(828,846)		(845,981)
Maturities of investments	548,070		440,788
Net cash used in investing activities	(701,494)		(793,994)
Financing activities
Repurchase of common stock	(662,605)		(437,305)
Tax withholding on stock-based compensation awards	(73,349)		(68,613)
Other financing activities	990		546
Net cash used in financing activities	(734,964)		(505,372)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1,495)		4
Net change in cash, cash equivalents, and restricted cash	140,353		218,656
Cash, cash equivalents, and restricted cash at beginning of period	586,163		408,966
Cash, cash equivalents, and restricted cash at end of period	$	726,516	$	627,622
Supplemental disclosures of cash flow information
Income taxes paid	$	408,553	$	54,615
Purchases of leasehold improvements, property and equipment accrued in accounts payable and accrued liabilities	$	78,798	$	81,724
Repurchase of common stock accrued in accounts payable and accrued liabilities	$	12,000	$	15,312

See accompanying notes to condensed consolidated financial statements.

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CHIPOTLE MEXICAN GRILL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollar and share amounts in thousands, unless otherwise specified)

(unaudited)

1. Basis of Presentation and Update to Accounting Policies

In this quarterly report on Form 10-Q, Chipotle Mexican Grill, Inc., a Delaware corporation, together with its subsidiaries, is collectively referred to as “Chipotle,” “we,” “us,” or “our.”

We develop and operate restaurants that serve a relevant menu of burritos, burrito bowls, quesadillas, tacos, and salads, made using fresh, high-quality ingredients. As of September 30, 2024, we operated 3,615 restaurants including 3,540 Chipotle restaurants within the United States and 75 international Chipotle restaurants. Additionally, we had two international licensed restaurants. We manage our U.S. operations based on nine regions and aggregate our operations to one reportable segment.

On June 26, 2024, we effected a 50-for-1 stock split of our common stock and proportionately increased the number of authorized shares of common stock. All share and per share information, including share-based compensation, throughout this Quarterly Report on Form 10-Q has been retroactively adjusted to reflect the stock split. The shares of common stock retain a par value of $0.01 per share. Accordingly, an amount equal to the par value of the additional shares issued in the stock split was reclassified from capital in excess of par value to common stock. In the second quarter of 2024 we retired all treasury stock owned, which was recognized as a deduction from common stock for the shares' par value and the excess of cost over par as a deduction from retained earnings. All shares of common stock that we repurchase will be immediately retired and no longer held as treasury stock.

We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair presentation of our financial position and results of operations. Interim results of operations are not necessarily indicative of the results that may be achieved for the full year. The financial statements and related notes do not include all information and footnotes required by U.S. generally accepted accounting principles for annual reports. This quarterly report should be read in conjunction with the consolidated financial statements, footnotes and management’s discussion and analysis included in our annual report on Form 10-K for the year ended December 31, 2023.

2. Recently Issued Accounting Standards

In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure.” The ASU updates reportable segment disclosure requirements, primarily through requiring enhanced disclosures about significant segment expenses and information used to assess segment performance. The amendments do not change how segments are determined, aggregated, or how thresholds are applied to determine reportable segments. We expect to adopt the guidance in our annual report on Form 10-K for the year ending December 31, 2024 and thereafter. We are currently evaluating the impact of adopting this ASU on our disclosures and do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The ASU includes amendments requiring enhanced income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and should be applied either prospectively or retrospectively. We are currently evaluating the impact of adopting this ASU on our disclosures.

In March 2024, the Securities and Exchange Commission ("SEC") issued its final climate disclosure rules. The rules require disclosure of climate-related information outside of the audited financial statements and disclosure in the footnotes addressing specified financial statement effects of severe weather events and other natural conditions above certain financial thresholds, certain carbon offsets and renewable energy credits or certificates, if material. Disclosure requirements will begin phasing in for fiscal years beginning on or after January 1, 2025. On April 4, 2024, the SEC determined to voluntarily stay the effective date of the final rules pending certain legal challenges. We are currently evaluating the impact of adopting the new rules and intend to include the updated climate-related disclosures in our filings when required.

We reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the condensed consolidated financial statements.

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3. Revenue Recognition

Gift Cards

We sell gift cards, which do not have expiration dates, and we do not deduct non-usage fees from outstanding gift card balances. Gift card balances are initially recorded as unearned revenue. We recognize revenue from gift cards when the gift card is redeemed by the customer. Historically, the majority of gift cards are redeemed within one year. In addition, a portion of gift cards are not expected to be redeemed and will be recognized as breakage over time in proportion to gift card redemptions (“gift card breakage rate”). The gift card breakage rate is based on company and program specific information, including historical redemption patterns, and expected remittance to government agencies under unclaimed property laws, if applicable. We evaluate our gift card breakage rate estimate annually, or more frequently as circumstances warrant, and apply that rate to gift card redemptions. Gift card liability balances are typically highest at the end of each calendar year following increased gift card sales during the holiday season; accordingly, revenue recognized from gift card liability balances is highest in the first quarter of each calendar year.

The gift card liability included in unearned revenue on the condensed consolidated balance sheets was as follows:


	September 30, 2024		December 31, 2023
Gift card liability	$	130,813	$	164,930

Revenue recognized from the redemption of gift cards that was included in unearned revenue at the beginning of the year was as follows:


	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Revenue recognized from gift card liability balance at the beginning of the year	$	6,906	$	6,481	$	64,104	$	56,402

Chipotle Rewards

We have a loyalty program called Chipotle Rewards. Customers who enroll in the program generally earn points for every dollar spent. We may also periodically offer promotions, which typically provide the customer with the opportunity to earn bonus points or other rewards. Customers may redeem earned points for various rewards, which are primarily comprised of free food and beverage items. Earned rewards generally expire one month to two months after they are issued, and points generally expire if an account is inactive for a period of six months.

We defer revenue associated with the estimated selling price of points or rewards earned by customers as each point or reward is earned, net of points or rewards we do not expect to be redeemed. The estimated selling price of each point or reward earned is based on the estimated value of the product for which the reward is expected to be redeemed. Our estimate of points and rewards we expect to be redeemed is based on historical and other company specific data. The costs associated with rewards redeemed are primarily included in food, beverage, and packaging on our condensed consolidated statements of income and comprehensive income. We evaluate Chipotle Rewards point breakage annually, or more frequently as circumstances warrant.

We recognize revenue associated with Chipotle Rewards within food and beverage revenue on the condensed consolidated statements of income and comprehensive income when a customer redeems an earned reward. Deferred revenue associated with Chipotle Rewards is included in unearned revenue on our condensed consolidated balance sheets.

Changes in our Chipotle Rewards liability included in unearned revenue on the condensed consolidated balance sheets were as follows:


	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Chipotle Rewards liability, beginning balance	$	49,183	$	40,923	$	44,750	$	38,057
Revenue deferred	39,792		32,947		120,024		95,672
Revenue recognized	(39,500)		(32,794)		(115,299)		(92,653)
Chipotle Rewards liability, ending balance	$	49,475	$	41,076	$	49,475	$	41,076

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4. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The carrying value of our cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value because of their short-term nature.

Our held-to-maturity investments are comprised of U.S. Treasury securities and corporate debt securities, which are held at amortized cost. We also have investments in notes receivable. Convertible notes are held at fair-value. Additionally, we maintain a deferred compensation plan with related assets held in a rabbi trust.

The following tables show our cash, cash equivalents, and debt investments by significant investment category as of September 30, 2024 and December 31, 2023:


	September 30, 2024
	Adjusted cost		Unrealized Gains		Unrealized Losses		Fair Value		Cash and Cash Equivalents		Current Investments		Long-term Investments
Cash	$	75,775	$	-	$	-	$	75,775	$	75,775	$	-	$	-
Level 1
Money market funds	545,215		-		-		545,215		545,215		-		-
Time deposits	77,557		-		-		77,557		77,557		-		-
U.S. Treasury securities	1,422,910		12,552		87		1,435,375		-		634,119		788,791
Corporate debt securities	48,127		355		-		48,482		-		29,851		18,276
Subtotal	2,093,809		12,907		87		2,106,629		622,772		663,970		807,067
Level 3
Corporate debt security(1)	16,801		-		17		16,784		-		1,600		15,201
Notes receivable(2)	4,593		233		-		4,826		-		3,106		1,720
Subtotal	21,394		233		17		21,610		-		4,706		16,921
Total	$	2,190,978	$	13,140	$	104	$	2,204,014	$	698,547	$	668,676	$	823,988

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	December 31, 2023
	Adjusted cost		Unrealized Gains		Unrealized Losses		Fair Value		Cash and Cash Equivalents		Current Investments		Long-term Investments
Cash	$	128,458	$	-	$	-	$	128,458	$	128,458	$	-	$	-
Level 1
Money market funds	355,872		-		-		355,872		355,872		-		-
Time deposits	76,279		-		-		76,279		76,279		-		-
U.S. Treasury securities	1,200,658		4,352		4,083		1,200,927		-		731,339		469,319
Corporate debt securities	19,755		13		7		19,761		-		-		19,755
Subtotal	1,652,564		4,365		4,090		1,652,839		432,151		731,339		489,074
Level 3
Corporate debt security(1)	17,401		-		27		17,374		-		999		16,402
Notes receivable(2)	14,500		1,289		141		15,648		-		2,500		13,148
Subtotal	31,901		1,289		168		33,022		-		3,499		29,550
Total	$	1,812,923	$	5,654	$	4,258	$	1,814,319	$	560,609	$	734,838	$	518,624

(1)The fair value of the corporate debt security is measured using Level 3 (unobservable) inputs. We determined the fair value for the corporate debt security using an internally-developed valuation model and unobservable inputs include credit and liquidity spreads and effective maturity.

(2)We have elected to measure our investment in convertible notes receivable of private companies at fair value under the fair value option. The fair value of the notes receivable are measured using Level 3 (unobservable) inputs. We determined the fair value for the notes receivable using an internally-developed valuation model and unobservable inputs include estimates of the equity value of the underlying business and the timing and probability of future financing events.

Rabbi Trust

We have elected to fund certain deferred compensation plan obligations through a rabbi trust, the assets of which are designated as trading securities. The rabbi trust is subject to creditor claims in the event of insolvency, but the assets held in the rabbi trust are not available for general corporate purposes. Amounts in the rabbi trust are invested in mutual funds, consistent with the investment choices selected by participants in their Deferred Plan accounts, which are designated as trading securities, carried at fair value and are included in other assets on the condensed consolidated balance sheets. We record trading gains and losses, along with the offsetting amount related to the increase or decrease in deferred compensation to reflect our exposure to liabilities for payment under the deferred plan in general and administrative expenses on the condensed consolidated statements of income and comprehensive income.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Assets recognized or disclosed at fair value on the condensed consolidated financial statements on a nonrecurring basis include items such as leasehold improvements, property and equipment, certain long-term investments, operating lease assets, other assets, and goodwill. These assets are measured at fair value whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable or if there has been an observable price change of a non-marketable equity security.

During the three months and nine months ended September 30, 2024 and 2023, nonrecurring fair value measurements resulting in asset impairments were not material.

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5. Equity Investments

The following table summarizes our equity investments as of September 30, 2024, and December 31, 2023:


	September 30, 2024		December 31, 2023
Equity method investments	$	29,401	$	8,896
Other investments	68,499		45,864
Total	$	97,900	$	54,760

Equity Method Investments

As of September 30, 2024 and December 31, 2023, we owned 6,487 and 4,325 shares of common stock of Tractor Beverages, Inc. (“Tractor”). As of September 30, 2024, our investment represents ownership of approximately 13.8% of Tractor, and we have invested total cash consideration of $14,872. As we are a significant customer of Tractor and maintain board representation, we are accounting for our investment under the equity method. There were no impairment charges for the nine months ended September 30, 2024 or 2023, associated with this equity method investment. The investment in common stock is included within other assets on the condensed consolidated balance sheets with a carrying value of $19,401 and $8,896 as of September 30, 2024 and December 31, 2023, respectively. Refer to Note 13, "Related Party Transactions" for related party disclosures.

Other Investments

During the three months ended September 30, 2024, we invested $15,000 in exchange for 2,746 shares of the Series B Preferred Stock of Hyphen Technologies, Inc. ("Hyphen") through the Cultivate Next Fund. As a result of Hyphen's Series B financing, the convertible notes receivable which we held prior to the financing converted into 3,073 shares of the Series B Preferred Stock of Hyphen. During the three months ended September 30, 2024, we recognized a gain of $4,635 related to the conversion. As of September 30, 2024, we held 5,819 shares of the Series B Preferred Stock of Hyphen. Hyphen is a privately held company, and as such, the preferred shares comprising our investment are illiquid and fair value is not readily determinable. As of September 30, 2024, we have recognized a cumulative gain of $6,782 related to our investment in Hyphen. The investment is included within long-term investments on the condensed consolidated balance sheet with a carrying value of $31,782 as of September 30, 2024.

As of September 30, 2024, we owned 766 shares of the Series C Preferred Stock of Nuro, Inc. (“Nuro”). Our investment represents a minority interest and we have determined that we do not have significant influence over Nuro. Nuro is a privately held company, and as such, the preferred shares comprising our investment are illiquid and fair value is not readily determinable. As of September 30, 2024, we have recognized a cumulative gain of $5,968 related to our investment in Nuro due to observable transactions in prior periods. The investment is included within long-term investments on the condensed consolidated balance sheets with a carrying value of $15,968 as of September 30, 2024 and December 31, 2023, respectively.

As of September 30, 2024, we held additional investments in other entities through the Cultivate Next Fund. These additional investments are included within long-term investments on the condensed consolidated balance sheets with a carrying value of $20,749 and $21,221 as of September 30, 2024 and December 31, 2023, respectively.

6. Shareholders’ Equity

We have had a stock repurchase program in place since 2008. As of September 30, 2024, we had $1,059,595 authorized for repurchasing shares of our common stock, which includes $400,000 in additional authorizations approved by our Board of Directors on August 21, 2024 and $500,000 in additional authorizations approved by our Board of Directors on September 19, 2024. Prior to June 26, 2024, shares we repurchased were held in treasury stock until they are reissued or retired at the discretion of our Board of Directors. Beginning on June 26, 2024, all shares of common stock that we repurchase are immediately retired and not held as treasury stock.

During the second quarter of 2024, we retired 507,166 shares of its common stock that were being held as treasury stock. The retirement resulted in a reduction of $5,194,196 in treasury stock, $5,072 in the par value of common stock, and $5,189,124 in retained earnings.

During the nine months ended September 30, 2024, 1,724 shares of common stock at a total cost of $73,349 were netted and surrendered as payment for minimum statutory withholding obligations in connection with the vesting of outstanding stock awards. During the nine months ended September 30, 2023, 2,011 shares of common stock at a total cost of $67,474 were netted and surrendered as payment for minimum statutory withholding obligations in connection with the vesting of outstanding stock awards. Shares surrendered by the participants in accordance with the applicable award agreements and plan are deemed repurchased by us but are not part of publicly announced share repurchase programs.

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7. Stock-Based Compensation

Pursuant to the 2022 Stock Incentive Plan, we grant stock-only stock appreciation rights ("SOSARs"), restricted stock units ("RSUs"), and performance stock units ("PSUs") to employees and non-employee directors. SOSARs and RSUs generally vest in two equal installments on the second and third anniversary of the grant date. PSUs are subject to service, market and performance vesting conditions, and the quantity of shares that vest will range from 0% to 300% of the targeted number of shares.

During the three months ended September 30, 2024, our now former CEO terminated employment with the company and forfeited all of his unvested equity awards. This resulted in a reversal of expense of $27,863 in the current quarter. In response to the CEO departure, we granted retention RSUs to key executives. These awards have various vesting terms, and will vest over one, two or three years. Total expense recognized for the retention RSUs in the current quarter was $5,134. The impact of the CEO forfeiture and employee retention awards are reflected in the tables below.

Total stock-based compensation expense was as follows:


	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Stock-based compensation	$	5,262	$	36,614	$	88,103	$	88,751
Stock-based compensation, net of income taxes	$	(1,058)	$	31,065	$	69,160	$	74,966
Total capitalized stock-based compensation included in leasehold improvements, property and equipment, net on the condensed consolidated balance sheets	$	602	$	813	$	2,200	$	2,194
Excess tax benefit on stock-based compensation recognized in provision for income taxes on the condensed consolidated statements of income and comprehensive income	$	3,073	$	994	$	19,161	$	23,004

SOSARs

A summary of SOSAR award activity was as follows (in thousands, except per share data):


	Shares	Weighted-Average Exercise Price per Share		Weighted-Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding, January 1, 2024	14,738	$	26.05		$	290,156
Granted	2,484	52.98
Exercised	(4,012)	20.61
Forfeited	(1,733)	38.49
Outstanding, September 30, 2024	11,477	31.90		4.10	295,564
Exercisable, September 30, 2024	5,084	23.39		2.39	174,018
Vested and expected to vest, September 30, 2024	10,911	31.41		4.02	286,376

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RSUs

A summary of RSU award activity was as follows (in thousands, except per share data):


	Shares	Weighted-Average Grant Date Fair Value per Share
Outstanding, January 1, 2024	3,004	$	32.08
Granted	2,578	53.63
Vested	(906)	31.95
Forfeited	(260)	38.92
Outstanding, September 30, 2024	4,416	44.29
Vested and expected to vest, September 30, 2024	3,875	44.06

PSUs

A summary of PSU award activity was as follows (in thousands, except per share data):


	Shares	Weighted-Average Grant Date Fair Value per Share
Outstanding, January 1, 2024	2,794	$	31.24
Granted	849	52.77
Vested	(777)	29.59
Forfeited	(838)	37.88
Outstanding, September 30, 2024	2,028	38.15
Vested and expected to vest, September 30, 2024*	3,580	37.91

*The vested and expected to vest total above represents outstanding base PSUs, adjusted for expected payout amounts in line with current and future estimated performance levels.

8. Income Taxes

The effective income tax rate for the three months ended September 30, 2024, was 22.9%, a decrease from an effective income tax rate of 24.2% for the three months ended September 30, 2023. The decrease was primarily driven by reductions to nondeductible expenses, the release of income tax reserves, and additional tax benefits related to option exercises and equity vesting, partially offset with a decrease in return to provision benefit in the comparable period.

The effective income tax rate for the nine months ended September 30, 2024 and 2023, was 23.5%, and primarily differed from the 21% U.S. federal statutory income tax rate due to the effects of state income taxes and nondeductible expenses, partially offset by the tax benefits on option exercises and equity vesting.

9. Leases

The majority of our operating leases consist of restaurant locations and office space. We determine if a contract contains a lease at inception. Our leases generally have remaining terms of 1-20 years and most include options to extend the leases for additional 5-year periods. Generally, the lease term is the minimum of the non-cancelable period of the lease or the lease term inclusive of reasonably certain renewal periods up to a term of 20 years.

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Supplemental disclosures of cash flow information related to leases were as follows:


	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Cash paid for operating lease liabilities	$	117,424	$	105,416	$	344,725	$	312,214
Operating lease assets obtained in exchange for operating lease liabilities	$	247,977	$	185,519	$	570,775	$	438,510
Derecognition of operating lease assets due to terminations or impairment	$	110	$	1,232	$	1,535	$	6,391

10. Earnings Per Share

The following table sets forth the computations of basic and diluted earnings per share (in thousands, except per share data):


	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Net income	$	387,388	$	313,217	$	1,202,346	$	946,651
Shares:
Weighted-average number of common shares outstanding (for basic calculation)	1,367,038		1,377,525		1,370,671		1,379,640
Dilutive stock awards	7,567		6,537		8,428		7,294
Weighted-average number of common shares outstanding (for diluted calculation)	1,374,605		1,384,062		1,379,099		1,386,934
Basic earnings per share	$	0.28	$	0.23	$	0.88	$	0.69
Diluted earnings per share	$	0.28	$	0.23	$	0.87	$	0.68

The following stock awards were excluded from the calculation of diluted earnings per share:


	Three months ended September 30,		Nine months ended September 30,
	2024	2023	2024	2023
Stock awards subject to performance conditions	2,028	2,801	2,437	2,684
Stock awards that were antidilutive	2,346	3,032	2,390	4,674
Total stock awards excluded from diluted earnings per share	4,374	5,833	4,827	7,358

11. Commitments and Contingencies

Purchase Obligations

We enter into various purchase obligations in the ordinary course of business, generally of a short-term nature. Those that are binding primarily relate to commitments for food purchases and supplies, capital projects, corporate assets, information technology, marketing initiatives and corporate sponsorships, and other miscellaneous items.

Litigation

We are involved in various claims and legal actions, such as wage and hour, wrongful termination and other employment-related claims, slip and fall and other personal injury claims, advertising and consumer claims, privacy claims, and lease, construction and other commercial disputes, that arise in the ordinary course of business, some of which may be covered by insurance. The outcomes of these actions are not predictable, but we do not believe that the ultimate resolution of any pending or threatened actions of these types will have a material adverse effect on our financial position, results of operations, liquidity, or capital resources. However, if there is a significant increase in the number of these claims, or if we incur greater liabilities than we currently anticipate under one or more claims, it could materially and adversely affect our business, financial condition, results of operations and cash flows.

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Accrual for Estimated Liability

In relation to various legal matters, we had an accrued legal liability balance of $14,958 and $7,640 included within accrued liabilities on the condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023, respectively.

12. Debt

As of September 30, 2024, we had a $500,000 revolving credit facility with JPMorgan Chase Bank (“JPMorgan”) as administrative agent. Borrowings on the credit facility bear interest at a rate equal to the Secured Overnight Financing Rate (“SOFR”) plus 1.475%, which is subject to increase due to changes in our total leverage ratio as defined in the credit agreement. We are also obligated to pay a commitment fee of 0.175% per year for unused amounts under the credit facility, which also may increase due to changes in our total leverage ratio. Further, we are subject to certain covenants defined in the credit agreement, which include maintaining a total leverage ratio of less than 3.0x, maintaining a consolidated fixed charge coverage ratio of greater than 1.5x, and limiting us from incurring additional indebtedness in certain circumstances. We had no outstanding borrowings under the credit facility and were in compliance with all covenants as of September 30, 2024 and December 31, 2023, respectively.

13. Related Party Transactions

As of September 30, 2024, we owned approximately 13.8% of the common stock outstanding of Tractor. As we are a significant customer of Tractor and maintain board representation, we are accounting for our investment under the equity method. Accordingly, we have identified Tractor as a related party. We purchase product from the supplier for sale to customers in our restaurants. During the three months ended September 30, 2024 and 2023, purchases from the supplier were $13,788 and $12,509, respectively. During the nine months ended September 30, 2024 and 2023, purchases from the supplier were $38,754 and $32,682, respectively.

We are an investor in Vebu Inc. (“Vebu”), a developer of restaurant automation technology. As we are a significant customer of Vebu and maintain board representation, we have determined that Vebu is a related party. Our investment, which is comprised of preferred shares, is accounted for as a non-marketable equity investment and is included within long-term investments on the condensed consolidated balance sheet. During the three months ended September 30, 2024 and 2023, purchases from Vebu were $545 and $248, respectively. During the nine months ended September 30, 2024 and 2023, purchases from Vebu were $545 and $991, respectively.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

Certain statements in this report are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements about the number of new restaurants we expect to open and the number with Chipotlanes, our expectation to generate positive cash flow for the foreseeable future, our expectations for utilization of cash flow from operations, our ability to manage risks and volatility in our supply chain, our plans for continuing stock buybacks and the period of time during which our cash and short-term investment will fund our operations. We use words such as “anticipate”, “believe”, “could”, “should”, “may”, “approximately”, “estimate”, “expect”, “intend”, “project”, “target”, "goal" and similar terms and phrases, including references to assumptions, to identify forward-looking statements. The forward-looking statements in this report are based on currently available operating, financial and competitive information available to us as of the date of this filing 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, including as a result of state or local regulations mandating higher minimum wages, 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; risks of food safety incidents and food-borne illnesses; risks associated with our reliance on certain information technology systems and potential material failures, interruptions or outages; privacy and cyber security risks, including risk of breaches, unauthorized access, theft, modification, destruction or ransom 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 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; the expected costs and risks related to our international expansion, including through licensed restaurants in the Middle East; increases in ingredient and other operating costs due to inflation, global conflicts, severe weather and climate change, our Food with Integrity philosophy, tariffs or trade restrictions; intermittent supply shortages relating to our Food with Integrity philosophy, rapid expansion and supply chain disruptions; the uncertainty of our ability to achieve expected levels of comparable restaurant sales due to factors such as changes in guests' perceptions of our brand, including as a result of negative publicity or social media posts, 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 and the IT infrastructure; litigation risks, including possible governmental actions and potential class action litigation related to food safety incidents, cybersecurity incidents, employment or privacy laws, advertising claims, contract disputes or other matters; and other risk factors described from time to time in our SEC reports, including our Annual Report on Form 10-K for the year ended December 31, 2023, and in other reports filed with the SEC, all of which are available on the investor relations page of our website at ir.Chipotle.com.

As of September 30, 2024, we operated 3,540 Chipotle restaurants throughout the United States and 75 international Chipotle restaurants. Additionally, we had two international licensed restaurants. We manage our U.S. operations based on nine regions and aggregate our operations to one reportable segment.

Throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations” we commonly discuss the following key operating metrics which we believe will drive our financial results and long-term growth model. We believe these metrics are useful to investors because management uses these metrics to assess the growth of our business and the effectiveness of our marketing and operational strategies:

•Comparable restaurant sales

•Food, beverage, and packaging as a percentage of total revenue

•Labor as a percentage of total revenue

•Occupancy as a percentage of total revenue

•Other operating costs as a percentage of total revenue

•New restaurant openings

Third Quarter 2024 Financial Highlights, year-over-year:

•Total revenue increased 13.0% to $2.8 billion

•Comparable restaurant sales increased 6.0%

•Diluted earnings per share was $0.28, a 21.7% increase from $0.23, which includes a $0.01 after-tax net benefit in stock-based compensation expense due to unvested equity awards forfeited by our former CEO and related retention equity awards granted to key executives, an unrealized gain on a long-term investment, and an impairment charge related to a software asset.

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Sales Trends. Comparable restaurant sales increased 6.0% for the three months ended September 30, 2024. The increase is attributable to higher transactions of 3.3% and a 2.7% increase in average check. Comparable restaurant sales represent the change in period-over-period total revenue for restaurants in operation for at least 13 full calendar months. Digital sales represented 34.0% of total food and beverage revenue.

Restaurant Development. During the three months ended September 30, 2024, we opened 86 company-operated restaurants, which included 73 restaurants with a Chipotlane. We are on track to open approximately 285 to 315 new company-operated restaurants in 2024 and expect to open approximately 315 to 345 new company-operated restaurants in 2025, which assumes utility, construction, permit and inspection delays do not worsen. We expect that at least 80% of our new company-operated restaurants will include a Chipotlane.

Licensing. During the three months ended September 30, 2024, we opened one licensed restaurant in Kuwait in partnership with international licensed retail operator Alshaya Group.

Cultivate Next Fund. Our Cultivate Next Fund is a venture formed to make early-stage investments into strategically aligned companies that further our mission to Cultivate a Better World. The Fund has a size of $100.0 million, which is financed almost entirely by Chipotle. During the three months ended September 30, 2024, we made $28.0 million in investments through this Fund.

Restaurant Activity

The following table details company-operated restaurant unit data for the periods indicated.


	Three months ended September 30,		Nine months ended September 30,
	2024	2023	2024	2023
Beginning of period	3,530	3,268	3,437	3,187
Chipotle openings	86	62	185	149
Non-Chipotle openings	-	-	-	1
Chipotle permanent closures	(1)	(1)	(5)	(1)
Chipotle relocations	-	(2)	(2)	(9)
Non-Chipotle permanent closures	-	(6)	-	(6)
Total at end of period	3,615	3,321	3,615	3,321

The following table details licensed restaurant unit data for the periods indicated.


	Three months ended September 30,		Nine months ended September 30,
	2024	2023	2024	2023
Beginning of period	1	-	-	-
Licensed restaurant openings	1	-	2	-
Total at end of period	2	-	2	-

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Results of Operations

Our results of operations as a percentage of total revenue and period-over-period change are discussed in the following section.

Revenue


	Three months ended September 30,						Percentage		Nine months ended September 30,						Percentage
	2024			2023			change		2024			2023			change

	(dollars in millions)								(dollars in millions)
Food and beverage revenue	$	2,778.0		$	2,456.0		13.1	%	$	8,417.4		$	7,304.6		15.2	%
Delivery service revenue	15.5			15.9			(2.3	%)	51.1			50.8			0.7	%
Total revenue	$	2,793.6		$	2,471.9		13.0	%	$	8,468.5		$	7,355.3		15.1	%
Average restaurant sales (1)	$	3.184		$	2.972		7.1	%	$	3.184		$	2.972		7.1	%
Comparable restaurant sales increase	6.0%			5.0%					8.1		%	7.7		%
Transactions	3.3%			4.1%					5.8%			4.3%
Average check	2.7%			0.9%					2.3%			3.4%
Menu price increase	3.6%			2.8%					3.2%			6.0%
Check mix	(0.9		%)	(1.9		%)			(0.9		%)	(2.6		%)

(1)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.

The following is a summary of the change in restaurant sales for the period indicated:


	Three months ended		Nine months ended

	(dollars in millions)
For the period ended September 30, 2023	$	2,471.9	$	7,355.3
Change from:
Comparable restaurant sales	141.9		568.0
Restaurant not yet in comparable base opened in 2024	84.1		144.5
Restaurant not yet in comparable base opened in 2023	96.5		404.1
Other	(0.8)		(3.4)
For the period ended September 30, 2024	$	2,793.6	$	8,468.5

Food, Beverage and Packaging Costs


	Three months ended September 30,						Percentage		Nine months ended September 30,						Percentage
	2024			2023			change		2024			2023			change

	(dollars in millions)								(dollars in millions)
Food, beverage and packaging	$	855.5		$	734.2		16.5	%	$	2,508.3		$	2,165.4		15.8	%
As a percentage of total revenue	30.6		%	29.7		%	0.9	%	29.6		%	29.4		%	0.2	%

Food, beverage and packaging costs increased 0.9% as a percentage of total revenue for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was due to inflation across several ingredient costs, primarily avocados and dairy, higher usage of ingredients as we focused on ensuring consistent and generous portions, and a protein mix shift from the Smoked Brisket limited time offering. This increase was partially offset by a 1.2% benefit from menu price increases in the prior year.

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Food, beverage and packaging costs increased 0.2% as a percentage of total revenue for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase was due to higher usage of ingredients as we focused on ensuring consistent and generous portions, inflation across several ingredient costs, primarily avocados, and a protein mix shift from a Braised Beef Barbacoa marketing initiative and the Smoked Brisket limited time offering. This increase was partially offset by a 1.1% benefit from menu price increases in the prior year.

Labor Costs


	Three months ended September 30,						Percentage		Nine months ended September 30,						Percentage
	2024			2023			change		2024			2023			change

	(dollars in millions)								(dollars in millions)
Labor costs	$	696.8		$	616.3		13.1	%	$	2,072.9		$	1,811.8		14.4	%
As a percentage of total revenue	24.9		%	24.9		%	—	%	24.5		%	24.6		%	(0.1	%)

Labor costs remained flat as a percentage of total revenue for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The 1.0% benefit from sales leverage was offset by 0.8% due to restaurant wage inflation, of which 0.5% was due to minimum wage increases for our restaurants in California.

Labor costs decreased 0.1% as a percentage of total revenue for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, including 1.2% from sales leverage, partially offset by 0.9% due to restaurant wage inflation, of which 0.3% was due to minimum wage increases for our restaurants in California.

Occupancy Costs


	Three months ended September 30,						Percentage		Nine months ended September 30,						Percentage
	2024			2023			change		2024			2023			change

	(dollars in millions)								(dollars in millions)
Occupancy costs	$	142.6		$	126.3		12.9	%	$	416.9		$	372.1		12.0	%
As a percentage of total revenue	5.1		%	5.1		%	—	%	4.9		%	5.1		%	(0.2	%)

Occupancy costs remained flat as a percentage of total revenue for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The 0.3% benefit from sales leverage was offset by 0.2% due to increased occupancy expense associated with existing restaurants.

Occupancy costs decreased 0.2% as a percentage of total revenue for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, including 0.4% from sales leverage, partially offset by 0.2% due to increased occupancy expense associated with existing restaurants.

Other Operating Costs


	Three months ended September 30,						Percentage		Nine months ended September 30,						Percentage
	2024			2023			change		2024			2023			change

	(dollars in millions)								(dollars in millions)
Other operating costs	$	386.5		$	345.4		11.9	%	$	1,157.0		$	1058.3		9.3	%
As a percentage of total revenue	13.8		%	14.0		%	(0.2	%)	13.7		%	14.4		%	(0.7	%)

Other operating costs decreased 0.2% as a percentage of total revenue for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to 0.4% of sales leverage and 0.2% of lower delivery expenses, partially offset by 0.2% of higher advertising and marketing promotions expense.

Other operating costs decreased 0.7% as a percentage of total revenue for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to 0.6% of sales leverage and 0.2% of lower delivery expenses.

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General and Administrative Expenses


	Three months ended September 30,						Percentage		Nine months ended September 30,						Percentage
	2024			2023			change		2024			2023			change

	(dollars in millions)								(dollars in millions)
General and administrative expenses	$	126.6		$	159.5		(20.6	%)	$	506.3		$	464.3		9.0	%
As a percentage of total revenue	4.5		%	6.5		%	(2.0	%)	6.0		%	6.3		%	(0.3	%)

The following is a summary of the change in general and administrative expense for the period indicated:


	Three months ended		Nine months ended

	(dollars in millions)
For the period ended September 30, 2023	$	159.5	$	464.3
Change from:
Stock-based compensation, primarily forfeitures and, to a lesser extent, performance-based awards	(32.0)		(2.6)
Performance bonuses	(5.7)		(0.4)
Legal contingencies	(2.2)		12.3
Restructuring costs	(1.4)		(6.5)
Conferences, primarily biennial All Managers’ Conference	(0.3)		17.8
Outside services related to corporate initiatives	1.4		7.5
Wages	6.7		14.1
Other	0.6		(0.2)
For the period ended September 30, 2024	$	126.6	$	506.3

Depreciation and Amortization


	Three months ended September 30,						Percentage		Nine months ended September 30,						Percentage
	2024			2023			change		2024			2023			change

	(dollars in millions)								(dollars in millions)
Depreciation and amortization	$	84.3		$	78.5		7.4	%	$	251.2		$	233.9		7.4	%
As a percentage of total revenue	3.0		%	3.2		%	(0.2	%)	3.0		%	3.2		%	(0.2	%)

Depreciation and amortization decreased 0.2% as a percentage of total revenue for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023, primarily due to sales leverage, partially offset by increased depreciation expense associated with new restaurants.

Impairment, Closure Costs, and Asset Disposals


	Three months ended September 30,						Percentage		Nine months ended September 30,						Percentage
	2024			2023			change		2024			2023			change

	(dollars in millions)								(dollars in millions)
Impairment, closure costs, and asset disposals	$	15.2		$	7.2		109.6	%	$	26.4		$	31.8		(17.0	%)
As a percentage of total revenue	0.5		%	0.3		%	0.2	%	0.3		%	0.4		%	(0.1	%)

Impairment, closure costs, and asset disposals increased in dollar terms for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to property and equipment impairment charges related to a software asset.

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Impairment, closure costs, and asset disposals decreased in dollar terms for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to higher charges related to the replacement of certain leasehold improvements in the comparable period.

Interest and Other Income, Net


	Three months ended September 30,						Percentage		Nine months ended September 30,						Percentage
	2024			2023			change		2024			2023			change

	(dollars in millions)								(dollars in millions)
Interest and other income, net	$	29.3		$	18.4		59.3	%	$	70.5		$	43.8		61.1	%
As a percentage of total revenue	1.0		%	0.7		%	0.3	%	0.8		%	0.6		%	0.2	%

Interest and other income, net increased in dollar terms for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023, primarily due to increased interest income on our investments in U.S. Treasury securities, money market funds and time deposits due to a higher average investment balance and higher interest rates.

Provision for Income Taxes


	Three months ended September 30,						Percentage		Nine months ended September 30,						Percentage
	2024			2023			change		2024			2023			change

	(dollars in millions)								(dollars in millions)
Provision for income taxes	$	115.2		$	100.1		15.0	%	$	368.8		$	291.5		26.5	%
Effective income tax rate	22.9		%	24.2		%	(1.3	%)	23.5		%	23.5		%	—	%

The effective income tax rate decreased 1.3% for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, including 1.3% reduction in nondeductible expenses, a 0.4% release of income tax reserves, and a 0.4% in additional tax benefits related to option exercises and equity vesting, partially offset with a 0.8% decrease in return to provision benefit in 2023 versus 2024.

The effective income tax rate remained flat for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The nine months ended September 30, 2024, had a 0.6% decrease in tax benefits related to option exercises and equity vesting and a 0.3% decrease in return to provision benefit in 2023 versus 2024, partially offset by a 0.5% decrease in tax reserves and 0.4% reduction in nondeductible expenses.

Seasonality

Seasonal factors cause our profitability to fluctuate from quarter to quarter. Historically, our average daily restaurant sales and net income are lower in the first and fourth quarters due, in part, to the holiday season and because fewer people eat out during periods of inclement weather (the winter months) than during periods of mild or warm weather (the spring, summer and fall months). Other factors also have a seasonal effect on our results. For example, restaurants located near colleges and universities generally do more business during the academic year. Seasonal factors, however, might be moderated or outweighed by other factors that may influence our quarterly results, such as unexpected publicity impacting our business in a positive or negative way, worldwide health pandemics, impact of inflation on consumer spending, fluctuations in food or packaging costs, or the timing of menu price increases or promotional activities and other marketing initiatives. The number of trading days in a quarter can also affect our results, although, on an overall annual basis, changes in trading days do not have a significant impact.

Our quarterly results are also affected by other factors such as the amount and timing of non-cash stock-based compensation expense and related tax rate impacts, litigation, settlement costs and related legal expenses, impairment charges and non-operating costs, timing of marketing or promotional expenses, the number and timing of new restaurants opened in a quarter, and closure of restaurants. New restaurants typically have higher operating costs following opening because of the expenses associated with their opening and operating inefficiencies in the months immediately following opening. Accordingly, results for a particular quarter are not necessarily indicative of results to be expected for any other quarter or for any year.

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Liquidity and Capital Resources

Cash and Investments

As of September 30, 2024, we had a cash and marketable investments balance of $2.2 billion, non-marketable investments of $85.4 million and $28.0 million of restricted cash. After funding the current operations in our restaurants and support centers, the first planned use of our cash flow from operations is to provide capital for the continued investment in new restaurant construction. In addition to continuing to invest in our restaurant expansion, we expect to utilize cash flow from operations to: repurchase additional shares of our common stock subject to market conditions; invest in, maintain, and refurbish our existing restaurants; and for general corporate purposes. As of September 30, 2024, $1,059.6 million remained available for repurchases of shares of our common stock. Under the remaining repurchase authorizations, shares may be purchased from time to time in open market transactions, subject to market conditions.

Borrowing Capacity

As of September 30, 2024, we had $500.0 million of undrawn borrowing capacity under a line of credit facility.

Use of Cash

We believe that cash from operations, together with our cash and investment balances, will be sufficient to meet ongoing capital expenditures, working capital requirements and other cash needs for the foreseeable future. Assuming no significant declines in comparable restaurant sales, we expect we will generate positive cash flow for the foreseeable future.

We have not required significant working capital because customers generally pay using cash or credit and debit cards and because our operations do not require significant receivables, nor do they require significant inventories due, in part, to our use of various fresh ingredients. In addition, we generally have the right to pay for the purchase of food, beverages and supplies sometime after the receipt of those items, generally within ten days, thereby reducing the need for incremental working capital to support our growth.

Cash Flows

Cash provided by operating activities was $1.6 billion for the nine months ended September 30, 2024, compared to $1.5 billion for the nine months ended September 30, 2023. The increase was primarily due to higher net earnings and, to a lesser extent, net cash changes in non-tax operating assets and liabilities. This increase was partially offset by timing of tax-related payments.

Cash used in investing activities was $701.5 million for the nine months ended September 30, 2024, compared to $794.0 million for the nine months ended September 30, 2023. The change was primarily associated with a $124.4 million decrease in investment purchases net of investment maturities. This was partially offset by increased capital expenditures of $31.9 million primarily related to new restaurant development.

Cash used in financing activities was $735.0 million for the nine months ended September 30, 2024, compared to $505.4 million for the nine months ended September 30, 2023. The change was primarily due to increased repurchases of common stock of $225.3 million.

Critical Accounting Estimates

Critical accounting estimates are those that we believe are both significant and that require us to make difficult, subjective or complex judgments, often because we need to estimate the effect of inherently uncertain matters. We base our estimates and judgments on historical experiences and various other factors that we believe to be appropriate under the circumstances. Actual results may differ from these estimates, and we might obtain different estimates if we used different assumptions or factors. We had no significant changes to our critical accounting estimates as described in our annual report on Form 10-K for the year ended December 31, 2023.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Commodity Price Risks

We are exposed to commodity price risks. Many of the ingredients we use to prepare our food, as well as our packaging materials and utilities to run our restaurants, are ingredients or commodities that are affected by the price of other commodities, exchange rates, foreign demand, weather, seasonality, production, availability and other factors outside our control. We work closely with our suppliers and use a mix of forward pricing protocols under which we agree with our supplier on fixed prices for deliveries at some time in the future, fixed pricing protocols under which we agree on a fixed price with our supplier for the duration of that protocol, formula pricing protocols under which the prices we pay are based on a specified formula related to the prices of the goods, such as spot prices or based on changes in industry indices, and range forward protocols under which we agree on a price range for the duration of that protocol. Generally, our pricing protocols with suppliers can remain in effect for periods ranging from one to 24 months, depending on the outlook for prices of the particular ingredient. In some cases, we have minimum purchase obligations. We have tried to increase, where practical, the number of suppliers for our ingredients, which we believe can help mitigate pricing volatility, and we follow industry news, trade issues, exchange rates, foreign demand, weather, crises and other world events that may affect our ingredient prices. Increases in ingredient prices could adversely affect our results if we choose for competitive or other reasons not to increase menu prices at the same rate at which ingredient costs increase, or if menu price increases result in customer resistance. We also could experience shortages of key ingredients for many unforeseen reasons, such as crop damage due to inclement weather, if our suppliers need to close or restrict operations, or due to industry-wide shipping and freight delays.

Changing Interest Rates

We are exposed to interest rate risk through fluctuations of interest rates on our investments. As of September 30, 2024, we had $2.3 billion in cash and cash equivalents, current and long-term investments, and restricted cash, of which the substantial majority are interest bearing. Changes in interest rates affect the interest income we earn, and therefore impact our cash flows and results of operations.

Foreign Currency Exchange Risk

A portion of our operations consist of activities outside of the U.S. and we have currency risk on the transactions in other currencies and translation adjustments resulting from the conversion of our international financial results into the U.S. dollar. However, a substantial majority of our operations and investment activities are transacted in the U.S., and therefore our foreign currency risk is not material at this date.

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

As of September 30, 2024, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes during the fiscal quarter ended September 30, 2024 in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

For information regarding legal proceedings, refer to Note 11. "Commitments and Contingencies" in our condensed consolidated financial statements included in Item 1. “Financial Statements.”

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ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer

The table below reflects shares of common stock we repurchased during the third quarter of 2024.


		Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(2)
July		2,959,476	$	55.30	2,959,476	$	484,073,494
	Purchased 7/1 through 7/31
August		4,012,599	$	53.46	4,012,599	$	669,552,782
	Purchased 8/1 through 8/31
September		1,976,413	$	55.64	1,976,413	$	1,059,594,847
	Purchased 9/1 through 9/30
Total		8,948,488	$	54.55	8,948,488

(1)Shares were repurchased pursuant to repurchase programs announced on October 26, 2023, February 6, 2024, and July 24, 2024.

(2)The September total includes $400 million in additional authorizations approved by our Board of Directors on August 21, 2024 and $500 million in additional authorizations approved by our Board of Directors on September 19, 2024, and announced on October 29, 2024. There is no expiration date for this program. The authorization to repurchase shares will end when we have repurchased the maximum amount of shares authorized, or we have determined to discontinue such repurchases.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Adoption or Termination of 10b5-1 Trading Plans

During the quarter ended September 30, 2024, no Section 16 officer or director, as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934 (the “Exchange Act”) adopted, modified, or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as such terms are defined in Item 408(a) of Regulation S-K.

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ITEM 6. EXHIBITS

EXHIBIT INDEX


		Description of Exhibit Incorporated Herein by Reference
Exhibit Number	Exhibit Description	Form	File No.	Filing Date	Exhibit Number	Filed Herewith
10.1†	Form of 2024 Retention Restricted Stock Unit Award Agreement for Interim CEO	-	-	-	-	X
10.2†	Form of 2024 Retention Restricted Stock Unit Award Agreement for President and Chief Strategy Officer	-	-	-	-	X
10.3†	Form of 2024 Retention Restricted Stock Unit Award Agreement for other Executive Officers	-	-	-	-	X
10.4†	Form of Incremental Restricted Stock Unit Award Agreement for Interim CEO	-	-	-	-	X
10.5†	Form of Incremental Restricted Stock Unit Award Agreement for CFO	-	-	-	-	X
31.1	Certification of Chief Executive Officer of Chipotle Mexican Grill, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	-	-	-	-	X
31.2	Certificate of Chief Financial Officer of Chipotle Mexican Grill, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	-	-	-	-	X
32.1	Certification of Chief Executive Officer and Chief Financial Officer of Chipotle Mexican Grill, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	-	-	-	-	X
101.INS	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)	-	-	-	-	X
101.SCH	Inline XBRL Taxonomy Extension Schema Document	-	-	-	-	X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	-	-	-	-	X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	-	-	-	-	X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document	-	-	-	-	X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document	-	-	-	-	X
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)	-	-	-	-	X
†- Management contracts and compensatory plans or arrangements required to be filed as exhibits.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


CHIPOTLE MEXICAN GRILL, INC.

By:			/s/ Jamie McConnell
Name:			Jamie McConnell
Title:			Chief Accounting and Administrative Officer (principal accounting officer and duly authorized signatory for the registrant)

Date: October 29, 2024

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Date	Price Target	Rating	Analyst
4/28/2025		Buy → Hold	Argus
3/14/2025	$58.00 → $65.00	Hold → Buy	Loop Capital
3/3/2025	$65.00 → $70.00	Equal-Weight → Overweight	Morgan Stanley
2/5/2025	$59.00 → $73.00	Buy → Strong Buy	CFRA
11/15/2024	$70.00	Outperform	RBC Capital Mkts
8/14/2024	$54.00 → $58.00	Neutral → Outperform	Wedbush
7/16/2024	$3600.00 → $72.00	Outperform	Evercore ISI
6/13/2024	$3730.00	Buy	Goldman

SEC Form 10-Q filed by Chipotle Mexican Grill Inc.

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