Q2 2024 Chipotle Mexican Grill Inc Earnings Call

Good afternoon and welcome to the Chipotle second quarter fiscal 2024 earnings call.

Operator: Fiscal 2024 Earnings Call. All participants will be in listen-only mode.

Operator: Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad.

Speaker Change: All participants will be in listen-only mode.

Speaker Change: Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad.

Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2.

Operator: To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Cindy Olsen, Head of Investor Relations and Strategy. Please go ahead.

Speaker Change: Please note, this event is being recorded. I would now like to turn the conference over to Cindy Olsen, Head of Investor Relations and Strategy. Please go ahead.

Cynthia Henn Olsen: Hello, everyone, and welcome to our second quarter fiscal 2024 earnings call. By now, you should have access to our earnings press release. If not, it may be found on our investor relations website at ir.chipotle.com. I will begin by reminding you that certain statements and projections made in this presentation about our future business and financial results constitute forward-looking statements. These statements are based on management's current business and market expectations, and our actual results could differ materially from those projected in the forward-looking statement.

Cynthia Henn Olsen: Hello, everyone, and welcome to our second quarter fiscal 2024 earnings call. By now, you should have access to our earnings press release. If not, it may be found on our investor relations website at ir.chipotle.com.

Speaker Change: I will begin by reminding you that certain statements and projections made in this presentation about our future business and financial results constitute forward-looking statements. These statements are based on management's current business and market expectations and our actual results could differ materially from those projected in the forward-looking statements.

Cynthia Henn Olsen: Please see the risk factors contained in our annual report on Form 10-K and in our Form 10-Qs for a discussion of risks that may cause our actual results to vary from these forward-looking statements. Our discussion today will include non-GAAP financial measures. A reconciliation to GAAP measures can be found via the link included on the presentation page within the investor relations section of our website.

Cynthia Henn Olsen: Please see the risk factors contained in our annual report on Form 10-K and in our Form 10-Q s for a discussion of risks that may cause our actual results to vary from these forward-looking statements.

Cynthia Henn Olsen: Our discussion today will include non-GAAP financial measures. A reconciliation to GAAP measures can be found via the link included on the presentation page within the Investor Relations section of our website.

Cynthia Henn Olsen: We will start today's call with prepared remarks from Brian Niccol, Chairman and Chief Executive Officer, and Jack Hartung, Chief Financial and Administrative Officer, after which we will take your questions. Our entire executive leadership team is available during the Q&A session. And with that, I will turn the call over to Brian. Thanks, Cindy, and good afternoon, everyone.

Speaker Change: We will start today's call with prepared remarks from Brian Niccol, Chairman and Chief Executive Officer, and Jack Hartung, Chief Financial and Administrative Officer, after which we will take your questions. Our entire executive leadership team is available during the Q&A session. And with that, I will turn the call over to Brian .

Brian R. Niccol: Before I begin discussing our results, I need to recognize and congratulate Jack Hartung on his nearly 25 years with Chipotle and roughly 80 earnings calls with all of you. I want to thank him for being a great friend, a terrific leader, and a champion for our purpose and brand. I'll say a few more words about Jack and Adam before I hand this over to you.

Brian R. Niccol: Thanks Cindy and good afternoon everyone. Before I begin discussing our results I need to recognize and congratulate Jack Hartung on his nearly 25 years with Chipotle and roughly 80 earnings calls with all of you.

Speaker Change: I want to thank him for being a great friend, a terrific leader, and a champion for our purpose and brand. I'll say a few more words about Jack and Adam before I hand it over to him.

Brian R. Niccol: Now turning to our results, the second quarter was outstanding as successful brand marketing, including the return of Chicken Al Pastor as a limited-time offer, drove strong demand to our restaurant. Additionally, our focus and training around throughput paid off as we were able to meet the stronger demand trends with terrific service and speed, driving over an 8% transaction comp in the quarter. For the quarter, sales grew 18% to reach nearly $3 billion, driven by an 11.1% comp. In-store sales grew by 24% over last year. Digital sales represented 35% of all sales.

Speaker Change: Now, turning to our results, the second quarter was outstanding as successful brand marketing, including the return of Chicken Al Pastor as a limited-time offer, drove strong demand to our restaurants.

Speaker Change: Additionally, our focus and training around throughput paid off as we were able to meet the stronger demand trends with terrific service and speed driving in driving over an 8% transaction comp in the quarter.

Speaker Change: For the quarter, sales grew 18% to reach nearly $3 billion, driven by an 11.1% comp.

Speaker Change: In-store sales grew by 24% over last year.

Brian R. Niccol: Restaurant-level margin was 28.9%, an increase of 140 basis points year over year. Adjusted diluted EPS was 34 cents, representing 36% growth over last year. And we opened 53 new restaurants, including 46 Chipotle. Before I give an update on our five key strategies, I want to take a minute to address the portion concerns that have been brought up on social media. First, there was never a directive to provide less to our customers.

Speaker Change: Digital sales represented 35% of sales.

Speaker Change: Restaurant level margin was 28.9%, an increase of 140 basis points year-over-year. Adjusted diluted EPS was $0.34, representing 36% growth over last year, and we opened 53 new restaurants, including 46 Chipotle's.

Speaker Change: Before I give an update on our five key strategies, I want to take a minute to address the portion concerns that have been brought up in social media. First, there was never a directive to provide less to our customers.

Brian R. Niccol: Generous portions are a core brand equity of Chipotle. It always has been, and it always will be. With that said, getting the feedback caused us to relook at our execution across our entire system with the intention to always serve our guests delicious, fresh, custom burritos and bowls with generous portions. To be more consistent, across all 3,500 restaurants, we have focused in on those with outlier portion scores based on consumer surveys, and we are re-emphasizing training and coaching around ensuring we are consistently making bowls and burri We have also leaned in on and re-emphasized generous portions across all of our restaurants as it is a core brand equity of Chipotle.

Speaker Change: Generous portions is a core brand equity of Chipotle. It always has been and it always will be. With that said, getting the feedback caused us to relook at our execution across our entire system with the intention to always serve our guests delicious, fresh, custom burritos and bowls with generous portions.

Speaker Change: To be more consistent, across all 3,500 restaurants, we have focused in on those with outlier portion scores based on consumer surveys, and we are re-emphasizing training and coaching around ensuring we are consistently making bowls and burritos correctly.

Speaker Change: We have also leaned in and re-emphasized generous portions across all of our restaurants, as it is a core brand equity of Chipotle. Our guests expect this now more than ever, and we are committed to making this investment to reinforce that Chipotle stands for a generous amount of delicious, fresh food, at fair prices, for every customer, every visit.

Brian R. Niccol: Our guests expect this now more than ever, and we are committed to making this investment to reinforce that Chipotle stands for a generous amount of delicious, fresh food at fair prices for every customer, every visit. The good news is that we are already beginning to see our actions positively reflected in our consumer scores, and our value proposition remains very strong. We believe our focus on operations, including throughput, as well as terrific marketing and menu innovation, have strengthened the brand and our value proposition.

Speaker Change: The good news is that we are already beginning to see our actions positively reflected in our consumer scores and our value proposition remains very strong.

Speaker Change: We believe our focus on operations, including throughput, as well as terrific marketing and menu innovation have strengthened the brand and our value proposition. And we will continue to listen to and treasure our guests to earn every transaction.

Brian R. Niccol: And we will continue to listen to and treasure our guests to earn every transaction. Now I will turn to our five key strategies that help us to win today while we grow our future. These strategies include running successful restaurants with a people-accountable culture that provides great food with integrity, while delivering an exceptional in-restaurant and digital experience. Sustaining world-class people leadership by developing and retaining diverse talent at every level.

Speaker Change: Now I will turn to our five key strategies that help us to win today while we grow our future.

Speaker Change: These strategies include running successful restaurants with a people-accountable culture that provides great food with integrity while delivering exceptional in-restaurant and digital experiences.

Speaker Change: Sustaining world-class people leadership by developing and retaining diverse talent at every level. Making the brand visible, relevant, and loved to improve overall guest engagement. Amplifying technology and innovation to drive growth and productivity at our restaurants.

Speaker Change: support centers and in our supply chain, and expanding access and convenience by accelerating new restaurant openings in North America and internationally.

Brian R. Niccol: Making the brand visible, relevant, and loved to improve overall guest engagement; amplifying technology and innovation to drive growth and productivity at our restaurants, support centers, and in our supply chain; and expanding access and convenience by accelerating new restaurant openings in North America and internationally. First, I will start with running a successful restaurant.

Brian R. Niccol: As I mentioned, the improvements we have seen in throughput positioned us well to meet the strong demand we experienced in the second quarter, driven by what we call burrito season, or our peak seasonality, as well as the success of Chicken Al Pastor. We often are asked why throughput is such an important operational KPI for Chipotle, so I thought I would begin by expanding on this. It is the outcome of a strong operational engine that delivers a great experience for our teams and our guests. In order to deliver exceptional throughput, our restaurants need to be fully staffed and properly deployed. Our crew needs to complete all food preparation on time, and they need to be well-trained to execute the four pillars.

Speaker Change: First, I will start with running successful restaurants.

Speaker Change: As I mentioned, the improvements we have seen in throughput positioned us well to meet the strong demand we experienced in the second quarter, driven by what we call burrito season, or our peak seasonality, as well as the success of chicken al pastor.

Speaker Change: We often are asked why throughput is such an important operational KPI for Chipotle, so I thought I would begin by expanding on this. It is the outcome of a strong operational engine that delivers a great experience for our teams and our guests.

Speaker Change: In order to deliver exceptional throughput, our restaurants need to be fully staffed and properly deployed. Our crew needs to complete all food prep on time, and they need to be well trained to execute the four pillars.

Brian R. Niccol: This results in a better overall experience for our crew, which leads to more stability and, therefore, more experienced teams that execute better every day. And for our guests, faster lines with hotter, fresher food. This type of guest experience strengthens our value proposition and drives incremental transactions. Over the last year, we have improved our tools and training to deliver exceptional throughput. This included right-sizing the cadence of digital orders during peak periods and enabling our restaurants to see, in real time, at the point of sale, the number of entrees in each 15-minute interval.

Speaker Change: This results in a better overall experience for our crew, which leads to more stability and therefore more experienced teams that execute better every day. And for our guests, faster lines with hotter, fresher food. This type of guest experience strengthens our value proposition and drives incremental transactions.

Speaker Change: Over the last year, we have improved our tools and training to deliver exceptional throughput. This included right-sizing the cadence of digital orders during peak periods and enabling our restaurants to see, in real time, at the point of sale, the number of entrees in each 15-minute interval. This has received tremendous feedback from our restaurant teams.

Brian R. Niccol: This has received tremendous feedback from our restaurants. It has helped to accelerate momentum as it creates excitement and allows our teams to celebrate in the moment when they achieve their goal, and our GMs can coach in the moment when they fall short.

Speaker Change: It has helped to accelerate momentum as it creates excitement and allows our teams to celebrate in the moment when they achieve their goal. And our GMs can coach in the moment when they fall short. In fact, one of our field leaders in New York had five of his eight restaurants achieve their throughput goal in the second quarter, which compares to just one of his restaurants a year ago.

Brian R. Niccol: In fact, one of our field leaders in New York had five of his eight restaurants achieve their throughput goal in the second quarter, which compares to just one of his restaurants a year ago. While we are seeing progress, we still have a lot of opportunity to increase the percentage of restaurants executing the four pillars. Expo is a great example, as it is the most impactful pillar.

Speaker Change: While we are seeing progress, we still have a lot of opportunity to increase the percentage of restaurants executing the four pillars. Expo is a great example, as it is the most impactful pillar. As a reminder, Expo is the crew member between Salsa and Cash who helps expedite the bagging and payment process.

Brian R. Niccol: As a reminder, Expo is the crew member between SALSA and CASH who helps expedite the bagging and payment process. Restaurants with an Expo in place are averaging five incremental entrees in their peak 15 minutes. Yet, we only see a little over half of our restaurants with an Expo in place during peak periods. This is certainly better than where it was a couple quarters ago, but it should be a lot higher. The good news is that I strongly believe we have the right leaders and training in place to keep the momentum going.

Speaker Change: Restaurants with an expo in place are averaging five incremental entrees in their peak 15 minutes, yet we only see a little over half of our restaurants with expo in place during peak periods.

Speaker Change: This is certainly better than where it was a couple quarters ago, but it should be a lot higher. The good news is that I strongly believe we have the right leaders and training in place to keep the momentum going. As we continue to gather the data on the execution of the four pillars and provide feedback and coaching on a weekly basis.

Brian R. Niccol: As we continue to gather data on the execution of the four pillars and provide feedback and coaching on a weekly basis, I am confident throughput can go much higher. This brings me to world-class people leadership.

Brian R. Niccol: As we mentioned last quarter, crew and GM turnover is at some of the best levels I've seen since I joined the company. And the stability is allowing us to develop and grow our people pipeline to achieve our goal of promoting over 90% from within. We have many inspiring stories at Chipotle of crew members who have grown with the company to become some of our top leaders. In fact, our recently promoted regional vice president started as a cook 25 years ago. She moved to the United States at 14 years old without knowing English.

Speaker Change: I am confident throughput can go much higher. This brings me to world-class people leadership. As we mentioned last quarter, crew and GM turnover is at some of the best levels I've seen since I joined the company. And the stability is allowing us to develop and grow our people pipeline to achieve our goal of promoting over 90% from within.

Speaker Change: We have many inspiring stories at Chipotle of crew members who have grown with the company to become some of our top leaders. In fact, our recently promoted regional vice president started as a crew member 25 years ago.

Brian R. Niccol: At 19, she started working at Chipotle and has worked her way up, including spending time in a language development role, supporting other employees at Chipotle to learn English as a second language. Her people-first mentality is what has made her so successful at hiring, developing, and retaining many of our best leaders. And she has two sisters that have each been with Chipotle for over 15 years and are top performing field workers. With the addition of her role, we now have three of our ten regional vice presidents who started as crew members and have made their way up to leading a region and managing over a billion dollars. These stories really do inspire our entire organization, as the opportunity to develop and grow within Chipotle, along with our industry-leading benefits and pay, enables us to attract and retain exceptional people.

Speaker Change: She moved to the United States at 14 years old without knowing English. At 19, she started working at Chipotle and has moved her way up, including spending time in a language development role, supporting other employees at Chipotle to learn English as a second language.

Speaker Change: Her people-first mentality is what has made her so successful at hiring, developing, and retaining many of our best leaders. And she has two sisters that have each been with Chipotle for over 15 years and are top performing field leaders.

Speaker Change: With the addition of her role we now have three of our ten regional vice presidents who started as crew members and have made their way up to leading a region and managing over a billion dollar business.

Speaker Change: These stories really do inspire our entire organization, as the opportunities to develop and grow within Chipotle, along with our industry-leading benefits and pay, enables us to attract and retain exceptional people.

Brian R. Niccol: In fact, as we look to expand to 7,000 restaurants in North America, we will be adding an RVP nearly every year along with hundreds of restaurant leadership. Finally, our 50-to-1 stock split, one of the largest in New York Stock Exchange history, enables our employees and others to purchase whole shares at more affordable prices and gives us more flexibility to compensate our top performers in stock, all with the goal of having more employees participate in the financial success of our company.

Speaker Change: In fact, as we look to expand to 7,000 restaurants in North America, we will be adding an RVP nearly every year along with hundreds of restaurant leadership roles.

Speaker Change: Finally, our 50 to 1 stock split, one of the largest in New York Stock Exchange history, enables our employees and others to purchase whole shares at more affordable prices and gives us more flexibility to compensate our top performers in stock, all with the goal to have more employees participate in the financial success of our company.

Brian R. Niccol: It really is an exciting time to be part of Chipotle. Now turning to marketing, the Chipotle brand continues to gain momentum as we focus on exceptional operations and making the brand more visible, more relevant, and more loved. Chicken Al Pastor is a great example as it once again surpassed our expectations, reaching over a 20% incidence rate, and more importantly, driving incremental transactions and spend. Similar to carne asada, we proved that when we bring back a limited-time offer, we are able to make it more delicious with seamless execution.

Speaker Change: It really is an exciting time to be part of Chipotle.

Speaker Change: Now turning to marketing, the Chipotle brand continues to gain momentum as we focus on exceptional operations and making the brand more visible, more relevant, and more loved.

Speaker Change: Chicken al pastor is a great example as it once again surpassed our expectations, reaching over a 20% incidence rate and more importantly driving incremental transactions and spend. Similar to carne asada we proved that when we bring back a limited time offer we are able to make it more delicious with seamless execution.

Brian R. Niccol: And while Chicken Al Pastor will end later this summer, I am excited to share that we will be bringing back smoked brisket this fall for a limited time. Brisket was among the most requested new menu items, as our guests loved the combination of smoked beef, charred on the grill, and finished with a brisket sauce made with smoky chili pepper.

Speaker Change: And while Chicken Al Pastor will end later this summer, I am excited to share that we will be bringing back smoked brisket this fall for a limited time.

Speaker Change: Brisket was among the most requested in many items, as our guests loved the combination of smoked beef, charred on the grill, and finished with a brisket sauce made with smoky chili peppers.

Brian R. Niccol: It took a huge cross-functional effort across supply chain, culinary, finance, and marketing to bring back this delicious LTO. Our marketing team also continues to find creative ways to generate excitement and drive more engagement around our annual promotion. In the second quarter, we had a record-breaking National Burrito Day where our gamified promotion resulted in Chipotle's best sales and digital sales day ever. It also drove an influx of new and lapsed customers and was the best enrollment day of the year for our rewards program.

Speaker Change: It took a huge cross-functional effort across supply chain, culinary, finance, and marketing to bring back this delicious LTO.

Speaker Change: Our marketing team also continues to find creative ways to generate excitement and drive more engagement around our annual promotions.

Speaker Change: In the second quarter, we had a record-breaking National Burrito Day, where our gamified promotion resulted in Chipotle's best sales and digital sales day ever. It also drove an influx of new and lapsed customers and was the best enrollment day of the year for our rewards program.

Brian R. Niccol: I'm also thrilled to share that later this week, Team Chipotle will be visible on the world stage as we leverage our Real Food for Real Athletes platform for those competing in Paris. We highlighted the inspiring journeys of Anthony Edwards, Sophia Smith, Taylor Fritz, Sarah Hughes, and Jagger.

Speaker Change: I'm also thrilled to share that later this week, Team Chipotle will be visible on the world stage as we leverage our Real Food for Real Athletes platform for those competing in Paris. We highlighted the inspiring journeys of Anthony Edwards, Sophia Smith, Taylor Fritz, Sarah Hughes, and Jagger Eaton.

Brian R. Niccol: Their go-to chipotle meals and how our ingredients have been a key component of their training regimen. We will also bring back our gold foil for burritos for a limited time in both North America and France to celebrate all of the athletes. Moving to technology and innovation, I want to provide an update on a few of our in-restaurant initiatives, starting with the dual-sided grill. Over the last year, the grill has been in 10 restaurants, and we have received consistent feedback that our teams and our guests love it.

Speaker Change: Their go-to Chipotle meals and how our ingredients have been a key component of their training regimens.

Speaker Change: We will also bring back our gold foil for burritos for a limited time in both North America and France to celebrate all of the athletes competing.

Speaker Change: Shifting to technology and innovation, I want to provide an update on a few of our in-restaurant initiatives.

Speaker Change: starting with the dual-sided grill. Over the last year, the grill has been in 10 restaurants. We have received consistent feedback that our teams and our guests love it.

Brian R. Niccol: The grill can cook the chicken and steak in under half the time it takes on the plancha, with consistent execution and the same sear and char. It also maintains better moisture, resulting in juicier chicken and steak with less waste.

Speaker Change: The grill can cook the chicken and steak in under half the time it takes on the plancha with consistent execution and the same sear and char. It also maintains better moisture, resulting in juicier chicken and steak with less waste. And for our teams, it takes one of the most complex positions in our restaurants and significantly improves the learning curve.

Brian R. Niccol: And for our teams, it takes one of the most complex positions in our restaurants and significantly improves the learning curve. Finally, for high-volume restaurants, it opens up capacity and drives efficiency during morning prep as chicken mistakes can be cooked closer to serve. We are in the process of rolling out the dual-sided grill to an additional 74 high-volume restaurants this year, and we'll continue to evaluate the economics prior to rolling it out further across the organization.

Speaker Change: Finally, for high-volume restaurants, it opens up capacity and drives efficiency during morning prep as chicken and steak can be cooked closer to serving.

Speaker Change: We are in the process of rolling out the dual-sided grill to an additional 74 high-volume restaurants this year, and we'll continue to evaluate the economics prior to rolling it out further across the organization.

Brian R. Niccol: Additionally, our automated digital production line in AutoCADO is making its way through final checks ahead of being pilot tested in their first restaurant. Our food safety and operation teams have worked closely with our technology teams to assure that the design takes into account things like cleaning, speed, and accuracy, as well as maintaining our high culinary standards. The next step will be to get each device into a restaurant to continue to learn and iterate as part of our stage gate process.

Speaker Change: Additionally, our automated digital make line in AutoCADO are making their way through final checks ahead of being pilot tested in their first restaurant. Our food safety and operation teams have worked closely with our technology teams to assure that the design takes into account things like cleaning, speed, and accuracy, as well as maintaining our high culinary standards.

Speaker Change: The next step will be to get each device into a restaurant to continue to learn and iterate as part of our stage gate process.

Brian R. Niccol: I'm excited about each of these initiatives, and I strongly believe we will see some impactful back-of-house changes in the years to come that will help to improve consistency in our restaurants and drive a better overall experience for our teams and our guests. I am also proud Chipotle continues to be a learning organization, using the stage gate process as our way to drive discipline around what ultimately gets rolled out. I am confident this process will further strengthen Chipotle as a leader in technology and innovation.

Speaker Change: I'm excited about each of these initiatives and I strongly believe we will see some impactful back of house changes in the years to come that will help to improve consistency in our restaurants and drive a better overall experience for our teams and our guests.

Speaker Change: I am also proud Chipotle continues to be a learning organization. Using the stage gate process is our way to drive discipline around what ultimately gets rolled out. I am confident this process will further strengthen Chipotle as a leader in technology and innovation.

Brian R. Niccol: Now moving to our final strategy, which is to expand access and convenience. In North America, we remain on track to open 285 to 315 new restaurants this year, and our openings remain strong across all markets. While our timelines remain consistent with last quarter, our development team continues to see ground breaks meaningfully higher compared to last year, which should help smooth the cadence of openings as we get into the back half of the year.

Speaker Change: Now moving to our final strategy, which is to expand access and convenience. In North America, we remain on track to open 285 to 315 new restaurants this year, and our openings remain strong across all markets.

Speaker Change: While our timelines remain consistent to last quarter, our development team continues to see ground breaks meaningfully higher compared to last year, which should help smooth the cadence of openings as we get into the back half of the year.

Brian R. Niccol: I also wanted to share an update on our partnership with the Al Shaya Group. Our first restaurant in Kuwait has been open for several months and continues to perform strongly. The good news is that the feedback from guests is that the culinary experience is right on par with North America, which is fantastic to hear. It also tells me that when we execute our culinary and deliver an exceptional experience for our guests, Chipotle's brand resonates across geography. We look forward to opening our second restaurant in Kuwait, as well as expanding into Dubai with the Al-Shaye group later this year.

Speaker Change: I also wanted to share an update on our partnership with the Al Shaya Group. Our first restaurant in Kuwait has been open for several months and continues to have strong performance.

Speaker Change: The good news is that the feedback from guests is that the culinary experience is right on par with North America, which is fantastic to hear. It also tells me that when we execute our culinary and deliver an exceptional experience for our guests, Chipotle's brand resonates across geographies.

Speaker Change: We look forward to opening our second restaurant in Kuwait, as well as expanding into Dubai with the Al Shaya Group later this year.

Brian R. Niccol: To close, our crew members, GMs, and field leadership delivered an excellent second quarter, helped by our committed support centers that enable restaurants to do better. We are very fortunate to have a clear purpose and an organization that is full of talented people at all levels. It is exciting to see the progress we have made so far, and I am confident there is much more growth in front of us. Finally, I want to spend a few minutes reflecting on my time with Jack and his extraordinary 25 years at Chipotle.

Speaker Change: To close, our crew members, GMs, and field leadership delivered an excellent second quarter, helped by our committed support centers that enable restaurants to better succeed.

Speaker Change: We are very fortunate to have a clear purpose and an organization that is full of talented people at all levels. It is exciting to see the progress we have made so far, and I am confident there is much more growth in front of us.

Jack: Finally, I want to spend a few minutes reflecting on my time with Jack and his extraordinary 25 years at Chipotle.

Brian R. Niccol: Jack is just as passionate about our brand and our purpose as he is about protecting our economic model. I know you all agree with me that he is one of the best CFOs in the business and has played an instrumental role in growing Chipotle from under 200 restaurants to over 3,500 restaurants. Investing in our premium ingredients and supply chain, protecting our exceptional value proposition, and delivering industry-leading economics in return. As Jack always says, these three characteristics are incredibly difficult to replicate.

Speaker Change: Jack is just as passionate about our brand and our purpose as he is about protecting our economic model. I know you all agree with me that he is one of the best CFOs in the business, and has played an instrumental role in growing Chipotle from under 200 restaurants to over 3,500 restaurants.

Speaker Change: Investing in our premium ingredients and supply chain, protecting our exceptional value proposition, and delivering industry-leading economics and returns.

Brian R. Niccol: Premium Ingredients, Affordable Prices, and Attractive Margin. Beyond that, he has developed an exceptional finance team, including Adam Reimer, who will become our next chief financial officer. For the last 15 years, Adam has reported directly or indirectly to and been mentored by Jack in preparation for this role.

Speaker Change: As Jack always says, these three characteristics are incredibly difficult to replicate. Premium ingredients, affordable prices, and attractive margins.

Speaker Change: Beyond that, he has developed an exceptional finance team, including Adam Reimer, who will become our next Chief Financial Officer.

Speaker Change: Over the last 15 years, Adam has reported directly or indirectly to and been mentored by Jack in preparation for this role. And importantly, he is just as passionate about our brand, our purpose, and protecting our economic model.

Speaker Change: I am highly confident he is the right leader to become our next CFO , and that it will be a smooth transition.

Speaker Change: So, again, thank you, Jack, for your friendship, leadership, and so many contributions to Chipotle. And with that, I'll turn it over to you.

Brian R. Niccol: And importantly, he is just as passionate about our brand, our purpose, and protecting our economic model. I am highly confident he is the right leader to become our next CFO and that it will be a smooth transition. So again, thank you, Jack, for your friendship, leadership, and so many contributions to Chipotle. And with that, I'll turn it over to you. Thank you, Brian, for those kind words. I'm extremely fortunate to have had the privilege and honor to serve Chipotle, our employees, and our shareholders for all these years. While retiring was one of the hardest decisions, it was also one of the easiest I've ever had to make.

Jack: Thank you, Brian , for those kind words.

Jack: I'm extremely fortunate to have had the privilege and honor to serve Chipotle, our employees, and our shareholders for all these years.

Jack: While retiring was one of the hardest decisions, it was also one of the easiest I've ever had to make. It was hard because Chipotle is a special brand, a special company, and it's full of special people.

John R. Hartung: It was hard because Chipotle is a special brand, a special company, and it's full of special people. But it was also easy because I know Chipotle is in great hands with a family of smart, talented people who are committed to our purpose to cultivate a better world. It's also easy because I have a large and growing extended family, and I treasure the time I get to spend with every one of them, and now I'll have the chance to enjoy even more special experiences with them.

Jack: But it was also easy because I know Chipotle is in great hands, with a family of smart, talented people who are committed to our purpose to cultivate a better world. It's also easy because I have a large and growing extended family, and I treasure the time I get to spend with every one of them, and now I'll have the chance to enjoy even more special experiences with them.

John R. Hartung: I'm delighted that Adam Reimer will be our next CFO, and as Brian mentioned, Adam has worked with me for 15 years, and I can tell you he's a very talented leader who knows our brand and our business well, and I'm confident in his ability to help lead Chipotle to the next level. In addition, Jamie McConnell will be elevated to our Chief Accounting and Administrative Officer. And since joining Chipotle six years ago, Jamie has provided great leadership, built strong teams, and is well prepared to serve in her new role.

Ryan: I'm delighted that Adam Reimer will be our next CFO . And as Brian mentioned, Adam has worked with me for 15 years, and I can tell you he's a very talented leader who knows our brand and our business well. And I'm confident in his ability to help lead Chipotle to the next level.

Speaker Change: In addition, Jamie McConnell will be elevated to our Chief Accounting and Administrative Officer. And since joining Chipotle six years ago, Jamie has provided great leadership, built strong teams, and is well prepared to serve in her new role.

John R. Hartung: With that said, I'll turn now to our quarterly results. Sales in the second quarter grew 18.2% year over year to reach about $3 billion as comp sales grew 11.1% driven by 8.7% transaction growth. The restaurant level margin of 28.9% increased about 140 base points compared to last year. Earnings per share adjusted for unusual items was $0.34, representing 36% year-over-year growth. The second quarter had unusual expenses related to an unrealized loss on an investment and an increase in legal reserves, which negatively impacted our earnings per share by one cent, leading to a gap earnings per share of 33 cents.

Speaker Change: With that said, I'll turn now to our quarterly results.

Speaker Change: Sales in the second quarter grew 18.2% year over year to reach about $3 billion as comp sales grew 11.1% driven by 8.7% transaction growth. Restaurant level margin of 28.9% increased about 140 basis points compared to last year.

Speaker Change: Earnings per share adjusted for unusual items was $0.34, representing 36% year-over-year growth.

Speaker Change: The second quarter had unusual expenses related to unrealized loss on an investment and an increase in legal reserves, which negatively impacted our earnings per share by one cent, leading to gap earnings per share of 33 cents.

John R. Hartung: Sales comps were highest in April, driven by the Easter shift, a strong reaction to the return of Cipanal Pastor, and several successful activations, including National Burrito Day. However, comps settled back to around 6% in June and continued to be driven by positive transactions. July has been more difficult to read so far due to the fourth holiday, weather disruptions in Texas, and the impact of a recent technology outage, but we believe the underlying trend remains similar to June.

Speaker Change: Sales comps were highest in April , driven by the Easter shift, a strong reaction to the return of Chick-fil-A Pastor, and several successful activations, including National Burrito Day.

Speaker Change: Comps settled back to around 6% in June and continued to be driven by positive transactions.

Speaker Change: July has been more difficult to read so far due to the fourth holiday, weather disruptions in Texas, and the impact from a recent technology outage, but we believe the underlying trend remains similar to June .

John R. Hartung: We are maintaining our full-year comp guidance of mid to high single-digits. And as a reminder, we will roll off about three points of pricing in early Q4 as we lap our menu price increase from last year. Before I go through the individual P&L line items, I want to give an overview of what to expect. We expect our margins to be under pressure for the next couple of quarters. Most, if not all, of this pressure is seasonal or temporary, or it's an investment that we can offset through efficiencies.

Speaker Change: We are maintaining our full year comp guidance of mid to high single digit, and as a reminder, we will roll off about three points of pricing in early Q4 as we lap our menu price increase from last year.

Speaker Change: Before I go through the individual P&L line items, I want to give an overview of what to anticipate.

Speaker Change: We expect our margins will be under pressure for the next couple of quarters. Most, if not all of this, pressure is seasonal, temporary, or it's an investment that we can offset through efficiencies, and we believe our industry-leading margin structure is still intact.

John R. Hartung: And we believe our industry-leading margin structure is still in place. And I'll go through each of the key P&L line items, beginning with cost of sales. Cost of sales in the quarter were 29.4%, in line with last year.

Speaker Change: and I'll go through each of the key P&L line items beginning with cost of sales.

John R. Hartung: The benefit of last year's menu price increase was offset by inflation in avocados, increased oil usage, and higher incidence of beef as a result of the continued success of Braised Beef Barbecoa marketing initiatives. For Q3, we expect our cost of sale to be just below 31%. About one-third of the step-up is due to the higher protein cost as we roll out Chicken Al Pastor and then launch Smoked Brisket later in the quarter.

Speaker Change: Cost of sales in the quarter were 29.4% in line with last year.

Speaker Change: The benefit of last year's menu price increase was offset by inflation in avocados, increased oil usage, and higher incidence of beef as a result of the continued success of Braised Beef Barbacoa Marketing Initiative.

Speaker Change: For Q3, we expect our cost of sale to be just below 31%.

Speaker Change: About one-third of the step-up is due to the higher protein cost as we roll off Chicken Al Pastor and then launch Smoked Brisket later in the quarter.

John R. Hartung: About one-third is due to an uptick in dairy and avocado prices. And the final third, or about 40 to 60 basis points, is an investment we are making as we focus on outlier restaurants to ensure a correct and generous portion. We expect this investment will ease from these levels somewhat, and we also believe that we can offset the remaining investment with efficiencies and innovation over time. While avocado prices are higher than the very favorable levels we have seen over the past several quarters, this is in line with our expectations from earlier this year.

Speaker Change: About one-third is due to an uptick in dairy and avocado prices.

Speaker Change: And the final third, or about 40 to 60 basis points, is an investment we are making as we focus on outlier restaurants to ensure a correct and generous portion. We expect this investment will ease from these levels somewhat, and we also believe that we can offset the remaining investment with efficiencies and innovation over time.

Speaker Change: While avocado prices are higher than the very favorable levels we have seen over the past several quarters, this is in line with our expectations from earlier this year.

John R. Hartung: Additionally, we are less impacted by the recent volatility in the Mexican avocado market as our supply chain team has done a fantastic job of diversifying our exposure, and in the third quarter, the majority of our avocados come from Peru. Outside of avocados and the protein mix shift, we anticipate underlying costs of sales inflation will be in the low single-digit range for the remainder of the year. Labor cost for the quarter was 24.1%, a decrease of about 20 basis points from last year, as the benefit from sales leveraged more than offset wage inflation.

Speaker Change: Additionally, we are less impacted by the recent volatility in the Mexican avocado market as our supply chain team has done a fantastic job of diversifying our exposure, and in the third quarter, the majority of our avocados come from Peru.

Speaker Change: Outside of avocados and the protein mix shift, we anticipate underlying cost of sales inflation will be in the low single digits range for the remainder of the year.

Speaker Change: Labor costs for the quarter were 24.1%, a decrease of about 20 basis points from last year, as the benefit from sales leveraged more than offset wage inflation.

John R. Hartung: For Q3, we expect our labor costs to be in the low 25% range due to seasonally lower sales, with wage inflation to remain at about 6%. And as a reminder, about half of the wage inflation is due to the nearly 20% step-up in wages in California as a result of the increase in the minimum wage for restaurant companies like ours that took effect in April. Other operating costs of the quarter were 12.9%, a decrease of about 100 basis points from last year. The decrease was primarily driven by sales leverage, and marketing promotion costs for 2.1% of sales in Q2.

Speaker Change: For Q3 we expect our labor cost to be in the low 25% range due to seasonally lower sales with wage inflation to remain at about 6%.

Speaker Change: And as a reminder, about half of the wage inflation is due to the nearly 20% step-up in wages in California as a result of the increase in minimum wage for restaurant companies like ours that took effect in April .

Speaker Change: Other operating costs for the quarter were 12.9%, a decrease of about 100 basis points from last year. The decrease was primarily driven by sales leverage. Marketing and promo costs were 2.1% of sales in Q2, and in Q3 we expect marketing costs to remain in the low 2% range, with the full year to be in the high 2% range.

John R. Hartung: And in Q3, we expect marketing costs to remain in the low 2% range, with the full year to be in the high 2%. In Q3, other operating costs are expected to be in the high 13% range due to seasonally lower sales and higher seasonal expenses like utilities and maintenance and repair. Based on these expectations, we anticipate restaurant level margin to be around 25% in Q3. As I mentioned earlier, some of the pressure is seasonal, like the shift from chicken al pastor to brisket.

Speaker Change: In Q3, other operating costs are expected to be in the high 13% range due to seasonally lower sales and higher seasonal expenses like utilities and maintenance and repair.

Speaker Change: Based on these expectations provided, we anticipate restaurant level margin to be around 25% in Q3.

John R. Hartung: Some is temporary, like the higher prices for avocados and dairy, which if they persist, we can address with menu prices over time. And finally, we're confident that the investment we're making to ensure we are delivering correct and generous portions can be offset by efficiencies and innovation over time. Q&A for the quarter was $175 million on a GAAP basis, or about $171 million on a non-GAAP basis, excluding a $4 million increase in legal reserve. GNA also includes $122 million in underlying GNA. $43 million dollars related to non-cash stock compensation.

Speaker Change: As I mentioned earlier, some of the pressure is seasonal, like the shift from Chuck and Al Pastor to brisket.

Speaker Change: Some is temporary, like the higher prices in avocados and dairy, which if they persist, we can address with menu prices over time. And finally, we're confident that the investment we're making to ensure we're delivering correct and generous portions can be offset by efficiencies and innovation over time.

Speaker Change: Q&A for the quarter was $175 million on a gap basis, or about $171 million on a non-gap basis, excluding $4 million increase in legal reserves.

Speaker Change: G&A also includes 122 million dollars in underlying G&A, 43 million dollars related to non-cash stock compensation, and six million dollars related to higher bonus accrual and payroll taxes on equity vesting and exercises.

John R. Hartung: $6 million related to higher bonus accrual and payroll taxes on equity vesting and exercise. We expect our underlying G&A to be around $128 million in Q3 and step up each quarter as we make investments in people to support ongoing growth. The anticipated stock comp will be around $40 million in Q3, although this amount could move up or down based on our actual results. We also expect to recognize around $6 million related to higher bonus accruals and employer taxes associated with shares at best during the quarter, bringing our anticipated total G&A in Q3 to around $175 million.

Speaker Change: We expect our underlying G&A to be around $128 million in Q3 and step up each quarter as we make investments in people to support ongoing growth.

Speaker Change: We anticipate stock comp will be around $40 million in Q3, although this amount could move up or down based on our actual results.

Speaker Change: We also expect to recognize around $6 million related to higher bonus accruals and employer taxes associated with shares that vest during the quarter, bringing our anticipated total G&A in Q3 to around $175 million.

John R. Hartung: Appreciation for the quarter was $84 million at 2.8% of sales, and we expect appreciation to step up slightly each quarter as we continue to open more restaurants. Our effective tax rate for Q2 was 25% for GAAP, as well as for non-GAAP.

Speaker Change: Appreciation for the quarter was 84 million dollars or 2.8 percent of sales and we expect appreciation to step up slightly each quarter as we continue to open more restaurants.

Speaker Change: Our effective tax rate for Q2 is 25% for GAAP as well as for non-GAAP .

John R. Hartung: Our effective tax rate benefited from option exercise and equity vesting above the grant value. And for fiscal 2024, we estimate our underlying effective tax rate will be in the 25% to 27% range, though it may vary based on discrete items. On June 26, we successfully completed our 50 for 1 stock split, one of the largest in New York Stock Exchange history.

Speaker Change: Our effective tax rate benefited from option exercises and equity vesting above the grant values. And for fiscal 2024, we estimate our underlying effective tax rate will be in the 25% to 27% range, though it may vary based on discrete items.

Speaker Change: On June 26, we successfully completed our 50 for 1 stock split, one of the largest in New York Stock Exchange history. We believe this will make our stock more accessible to our employees as well as a broader range of investors.

John R. Hartung: We believe this will make our stock more accessible to our employees as well as a broader range of investors. Our balance sheet remains strong as we ended the quarter with $2.5 billion in cash, restricted cash, and investments with no debt. During the quarter, we repurchased $151 million of our stock at an average price of $63.52. At the end of the quarter, we had nearly $650 million remaining under our share authorization program.

Speaker Change: Our balance sheet remains strong as we end the quarter with $2.5 billion in cash, restricted cash, and investments with no debt.

Speaker Change: During the quarter, we repurchased $151 million of our stock at an average price of $63.52. At the end of the quarter, we had nearly $650 million remaining under our share authorization program.

John R. Hartung: We opened 53 new restaurants in the second quarter, of which 46 had a Chipotle. We continue to anticipate opening between 285 to 315 new restaurants in 2024, with over 80% having a Chipotle. And we remain on track to move towards the high end of the 8 to 10% range by 2025, assuming timeline conditions do not worsen. To close, I also want to thank our employees for all their hard work in driving our strong results and for continuing to build and grow Chipotle.

Speaker Change: We opened 53 new restaurants in the second quarter, of which 46 had a Chipotle.

Speaker Change: We continue to anticipate opening between 285 to 315 new restaurants in 2024, with over 80% having a Chipotle, and we remain on track to move towards the high end of the 8 to 10% range by 2025, assuming timeline conditions do not worsen.

Speaker Change: To close, I also want to thank our employees for all their hard work in driving our strong results and for continuing to build and grow Chipotle. I also want to reflect on our historic 50-to-1 stock split.

John R. Hartung: I also want to reflect on a historic 50-to-1 stock split. When Chipotle went public at $22 per share in 2006, I was very optimistic that we had a special brand with a tremendous growth opportunity. I'm not sure I could have ever imagined, then, that we would split the shares at just over $3,200 per share.

Speaker Change: When Chipotle went public at $22 per share in 2006, I was very optimistic that we had a special brand with a tremendous growth opportunity.

Speaker Change: I'm not sure I could have ever imagined then that we would split the shares at just over $3,200 per share, but I did envision that we would reach over 3,000 restaurants as we have today in the U.S.

Operator: But I did anticipate that we would reach over 3,000 restaurants, as we have today in the U.S. And today, I know we have a special brand with industry-leading economics and returns. I'm also just as optimistic about a growth opportunity to reach 7,000 restaurants in North America and to expand internationally. And as we further our purpose of cultivating a better world, we'll continue to deliver extraordinary value for our guests, our employees, and our shareholders.

Speaker Change: and today I know we have a special brand with industry-leading economics and returns. I'm also just as optimistic about a growth opportunity to reach 7,000 restaurants in North America and to expand internationally. And as we further our purpose of cultivating a better world, we'll continue to drive extraordinary value for our guests, our employees, and our shareholders.

Operator: It's truly an exciting time to be part of this purpose-driven company with seemingly limitless opportunities. And with that, I'll open the line to your questions. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.

Speaker Change: It's truly an exciting time to be part of this purpose-driven company with seemingly limitless opportunity. And with that, I'll open the line to your questions.

Speaker Change: We will now begin the question and answer session.

Speaker Change: To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys.

Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time we will pause momentarily to assemble our roster.

Operator: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from David Tarantino with Baird. Please go ahead. Hi, good afternoon.

Speaker Change: The first question comes from David Tarantino with Baird. Please go ahead.

David E. Tarantino: First, Jack, congratulations on an amazing career at Chipotle. You're going to be missed, and we look forward to... that I'm going forward. So my question is about the sales trends you called out. I think you said the comps moderated. (Inaudible) I just wanted to get your thoughts on why.

David E. Tarantino: Hi, good afternoon. First, Jack, congratulations on an amazing career at Chipotle and you're going to be missed and we look forward to working with Adam going forward. Thanks, David.

David E. Tarantino: So, my question is about the sales trends you called out. I think you said the comps moderated into the kind of 6% ballpark in June , and you think that underlying trend has carried over into July . And while that's, you know, very good relative to what we're seeing from a lot of brands, it is slower than what you were running previously. So I just wanted to get your thoughts on why.

Speaker Change: You think you saw that slow down, you know, whether it's macro or something inside the business that may have caused that.

Brian R. Niccol: I saw that slow down, you know, whether it's macro or something inside. When do we start? I'll start. And then Jack can fill in.

Brian R. Niccol: The, you know, look, first of all, David, I would tell you the quarter was really spectacular. When we look at brand metrics, they've never been stronger. So, you know, value, food scores, you know, all the key metrics to make sure that the brand's in a good spot really continue to improve throughout the quarter. And then from an operating standpoint, I don't know if you've been doing restaurants recently, but I think the teams are doing a terrific job of continuing to deliver great food and great throughput.

Jack: That's when we start. I'll start, and then Jack can fill in. The, uh, you know, look, first of all, David, I would tell you the quarter was really spectacular. Um, and when we look at brand metrics, they've never been stronger, so...

Jack: you know, value, food scores.

Jack: You know, all the key metrics to make sure that the brand's in a good spot.

Jack: really continue to improve throughout the quarter.

Jack: And then from an operating standpoint...

Jack: I don't know if you've been to our restaurants recently, but I think the teams are doing a terrific job.

Brian R. Niccol: And then obviously, as we mentioned in earlier comments, we've doubled down on making sure we're also providing great portions, which is, you know, I think a key equity for this business as well. You know, one of the things we've seen, which is consistent with what we saw last year, is this kind of seasonal move with kind of the summer change in behaviors. And so, you know, obviously, we're trying to understand what that looks like because it appears to be new trends since coming out of COVID. So that's one piece of the puzzle.

Jack: on continuing to deliver great culinary, great throughput.

Jack: And then, obviously, we mentioned in our earlier comments, we've doubled down on making sure we're also providing great portions, which is...

Jack: You know, I think a key equity for this business as well.

Speaker Change: You know, one of the things we've seen, which is consistent with what we saw last year, is this kind of seasonal move with kind of the summer.

Speaker Change: change of behaviors. And so.

Speaker Change: You know, obviously, we're trying to understand what that looks like because it appears to be new trends.

Speaker Change: since coming out of COVID.

Speaker Change: So that's that's one piece of the puzzle and obviously we're trying to understand if there are any.

Brian R. Niccol: And then obviously, we're trying to understand if there are any macro things going on as well. But the one thing we know for sure is that the feedback on the business from our customers has been great value, great food, and improving speed. And those are the things we can control, and those are the things we're going to stay focused on delivering going forward. Jack, I don't know if you want to add anything.

Speaker Change: Macro things going on as well but

Speaker Change: The one thing we know for sure is the feedback on the business from our customers.

Speaker Change: has been great value, great culinary, and improving speed. And those are the things we can control, and those are the things we're going to stay focused on delivering going forward. Jack, I don't know if you want to add anything. No, I mean, just to, you know, add some more texture to the, like, the seasonality. Things like July 4th used to be, like, a weekend, and now it looks like it's two weekends. So it looks like...

John R. Hartung: No, I mean, just to, you know, add some more texture to the seasonality, things like July 4th used to be like a weekend, and now it looks like it's two weekends. So it looks like the combination of there being a holiday and then work from home is more acceptable. Now it just seems like the holidays that used to be three or four days or so are stretching out a little bit. We even saw for the first time ever on Juneteenth; we saw a little softness there as well.

Jack: The combination of there's a holiday, and then work from home is more acceptable, now it just seems like the holidays that used to be three or four days or so, seems like they're stretching out a little bit. We even saw, for the first time ever on Juneteenth, we saw a little softness there as well, so we wonder if that's also kind of a work from home environment as well. So the last couple summers have been very hard to predict, and so we think that's definitely a big part of what we're seeing.

John R. Hartung: So we wonder if that's also kind of a work from home environment as well. So the last couple of summers have been very hard to predict. And so we think that's definitely a big part of what we're doing. Great, thank you very much. The next question comes from Sara Senatore with Bank of America. Please go ahead.

Speaker Change: Great, thank you very much.

Speaker Change: The next question comes from Sara Senatore with Bank of America. Please go ahead.

Sara Harkavy Senatore: I've enjoyed working with both of you. But the question I have first is just a quick follow-up. If you could just maybe talk a little bit about the composition of the comp, you know, the price mix, and how you're thinking about that going forward, given some of the reinvestments that you're making. And then also, I wanted to get a sense of store growth and how that is progressing. Just, I know, you know, there have been endemic problems across the industry, but the goal was to get the growth rate higher and perhaps into that 10% range next year. So any updates there? Thanks.

Sara Harkavy Senatore: Oh, thank you. First of all, congratulations to both Jack and Adam. I've enjoyed working with both of you.

Sara Harkavy Senatore: But the question I have first is just a quick follow-up, if you could just maybe talk a little bit about the composition of the comp, you know, price.

Sara Harkavy Senatore: Mix, and how you're thinking about that going forward, given some of the reinvestments that you are making. And then, also wanted to get a sense of store growth and how that is progressing, just, I know, you know, there have been...

Sara Harkavy Senatore: [inaudible]

John R. Hartung: Yeah, I'll start with the components of the comps, Sara. You know, transactions were up 8.7% during the quarter. We also had a menu price increase of effectively 3.3%. That was 3% that we took, you know, effectively a 3% that we took last year, and then we had the 1% effective that we took for the FAST Act as well. And we did have a negative mix, and the negative mix was based on group size. The negative mix was 1%.

Speaker Change: Yeah, I'll start with the components of the cons, Sara.

Speaker Change: Transactions were up 8.7% during the quarter. We also had menu price increase effectively was 3.3%.

Speaker Change: [inaudible]

Speaker Change: The 1% effective that we took for the FAST Act as well. And we did have a negative mix, and the negative mix was based on group size.

Speaker Change: The negative mix was 1%. Group size was down about 2%, but that was offset by we did have some add-ons, mostly in chips, queso, and extra meat as well. What we're seeing as we moved into June , we're still seeing transactions.

Speaker Change: be the main driver. So transactions were in the 3, 3.5% during the month of June .

John R. Hartung: Group size was down about 2%, but that was offset by the fact that we did have some add-ons, mostly chips, queso, and extra meat as well. What we're seeing as we moved into June, we're still seeing transactions be the main driver. So transactions were in the 3, 3.5% range during the month of June. And then on openings, I mean, we're still on track, Sara. We're not seeing the timeline

John R. Hartung: We did see some modest improvements so far this year, but the pipeline is very robust, and we feel good about the openings for this year. If that continues, just based on the inventory building alone, and if timelines don't worsen, we think we can get close to, if not all the way to, that 10% in the next year. So, we have the 3% from last year that runs out in the middle of October. But we'll continue to have California.

Speaker Change: And then on openings, I mean, we're still on track, Sara, we're not seeing the timelines.

Sara Harkavy Senatore: really changed it all. We did see some modest improvements so far.

Speaker Change: This year the pipeline is very robust and we feel good about

Sara Harkavy Senatore: the openings for this year. If that continues, just based on the inventory building alone, and if timelines don't worsen, we think we can get close to, if not all the way to that 10% in the next year.

Speaker Change: got it thank you and just pricing for the rest of the year

Speaker Change: So, we have the 3% from last year that runs out in the middle of October . We'll continue to have...

John R. Hartung: Right now, we have no plans for further pricing. I mean, we'll look at how the rest of the, you know, the next few months unfold. We'd love to get through the rest of the year based on what's going on. And again, we don't know how much seasonality is, whether there's something bigger going on. But it'd be great to not have to take any price for the rest of the year. Thank you

Speaker Change: California. Right now we have no plans for further pricing. I mean we'll look at how the rest of the, you know, the next few months unfold. We'd love to get through the rest of the year based on

Speaker Change: What's going on? And again, we don't know how much is seasonality, whether there's something bigger going on, but it'd be great to not have to take any price for the rest of this year.

Operator: The next question comes from Dennis Geiger with UBS; please go ahead. Great, thanks very much. And Jack and Adam, congratulations to you both.

Speaker Change: Thank you.

Speaker Change: The next question comes from Dennis Geiger with UBS. Please go ahead.

Dennis Geiger: Just wanted to ask Jack a little bit more on the margin commentary that you made, specifically as it relates to some of that pressure over the coming quarters. If you could dive in a little more to some of the moving pieces there, and maybe some of the efficiency offsets that you spoke to. Thank you.

Dennis Geiger: Great, thanks very much, and Jack and Adam, congratulations to you both. I just wanted to ask Jack a little bit more on the margin commentary that you made, specifically as it relates to some of that pressure.

Speaker Change: Over the coming quarters if you could dive in a little more to some of the moving pieces there and maybe some of the efficiency offsets That you spoke to. Thank you

John R. Hartung: We've got inflation. However, inflation generally has been relatively benign. We have two items; we called out avocado and dairy.

Jack: Yeah, so, you know, there's three main buckets. We've got inflation. Inflation generally has been...

Speaker Change: are relatively benign. We have two items we called out, avocado and dairy. Both of those ingredients we do expect either near the end of the year or into early next year. We think those will normalize.

John R. Hartung: Both of those ingredients, we do expect either near the end of the year or into early next year; we think those will normalize. Avocados, as you guys know, have really been a benefit. We've had great avocado prices for the last several quarters. And so even the current avocado prices, which we're seeing right now, are more in the normal range. But we think that those will ease through the end of the year or into next year.

Speaker Change: Avocados, as you guys know, have been really a benefit. We've had great avocado prices for the last several quarters.

Speaker Change: And so even the current avocado prices we're seeing right now.

John R. Hartung: So both of those we feel good about. We do have pricing power, so we'll watch it very closely. And at some point in the future, we'll be able to offset that. You know, the other item that we talked about, Brian mentioned, we decided that this brand equity called Generous Portions is something that we don't want to take for granted. We don't want to take something that's been positive for all these years and then have it turn out to be negative because of some of the social media comments.

Speaker Change: are more in the normal range, but we think that those will ease.

Speaker Change: through the end of the year or into next year. So both of those we feel good about. We do have pricing power, so we'll watch it very closely, and at some point in the future, we'll be able to

Speaker Change: You know, the other item that we talked about, Brian mentioned, we decided that this brand equity called

Speaker Change: generous portions is something that we don't want to take for granted. We don't want to take something that's been a positive for all these years and then have it turn out to be a negative because of some of the social media comments. So we've made this investment. We'll continue to make the investment. We already have a number of initiatives underway. Some of them are operational. Some of those are supply chain efficiencies. We won't go into details of what those are, but we do think over the next couple of quarters that we'll be able to see some of those efficiencies.

John R. Hartung: So we've made this investment; we'll continue to make this investment. We already have a number of initiatives underway. Some of them are operational; some of those are supply chain efficiencies. We won't go into details of what those are.

John R. Hartung: But we do think over the next couple of quarters that we'll be able to see, you know, some of those, you know, some of those efficiencies. And, I think that's really it in terms of where our margins are and what we think we can do. And just the move from chicken outpast to... Yeah, I mean, that's clearly temporary. Yeah. I mean, you have the makeshift.

Speaker Change: I think that's really it in terms of, you know, where our margins are and what we think we need to do. Just the move from chicken out fast towards... Yeah, I mean, that's clearly temporary. Yeah. I mean, you have the makeshift. Clearly, that's going to be an LTO. Once we move from...

John R. Hartung: Clearly, that's going to be an LTO. Once we move from, you know, brisket into the next LTO, especially if it's a chicken, not only will that reverse, but it'll turn into a positive for us. Makes sense. Thanks and congratulations. The next question comes from Peter Saleh with BTIG. Please go ahead.

Speaker Change: You know, brisket into the next LTO, especially if it's a chicken, not only will that reverse, but it'll turn into a positive for us.

Speaker Change: Makes sense. Thanks and congratulations.

Speaker Change: The next question comes from Peter Saleh with BTIG. Please go ahead.

Peter Mokhlis Saleh: Great, thanks. I did want to ask about labor, if I could. I think, Brian, you mentioned a little over half of the units with an expediter during peak hours. What's the holdup in terms of expanding the expediter to more units? Because it feels like that's a key driver of throughput. Is labor just really tight?

Peter Mokhlis Saleh: Great, thanks. I did want to ask about labor, if I could. I think, Brian , I think you mentioned a little over half of units with an expediter during peak hours.

Peter Mokhlis Saleh: What's the hold up in terms of expanding the expediter to more units because it feels like that's a key driver of throughput. Is labor just really tight? Is there a lot of turnover? Just any thoughts around that would be helpful. Thank you.

Brian R. Niccol: Is there a lot of turnover, or just any thoughts around that would be helpful? Thanks. Yeah, sure. So, look, the good news is we've made progress to get to 50%. The other piece of good news is that we've got experience in the past where we've been able to get to that number closer to 70 percent. So, you know, I'm confident with our operational leadership that's going on in the field right now.

Brian: Yeah, sure. So, look, the good news is we've made progress to get to the 50%. The other piece of good news is we've got...

Speaker Change: experience in the past where we've been able to get to that number closer to 70.

Speaker Change: plus percent.

Speaker Change: So, you know, I'm confident with our operational leadership that's going on in the field right now.

Brian R. Niccol: And here's a key piece of the puzzle, I think, that gives us the ability to improve from where we are. We have really great staffing levels right now, with turnover at some of the best levels it's been to date.

Speaker Change: And here's a key piece of the puzzle, I think, that gives us the ability to improve from where we are.

Speaker Change: We have really great staffing levels right now with turnover at some of the best levels it's been to date.

Brian R. Niccol: And so the fact that, you know, we're getting these teams to be, I would say, more cohesive, more centered on the culture of great throughput combined with great culinary, I'm confident that these teams will continue to improve. The other thing, too, you guys might have seen is that, as we talked about, giving our teams visibility through reporting has really enabled them to enhance their performance. And I think just repetition, using the tools that we have, and then just making sure that we don't have any real disruption to what the organization needs to be focused on.

Speaker Change: And so, the fact that we're getting these teams to be, I would say, more cohesive, more centered on the culture of great throughput, combined with great culinary, I'm confident that these teams will continue to improve.

Speaker Change: The other thing, too, you guys might have seen is...

Speaker Change: We talked about this, giving our teams the visibility through reporting.

Speaker Change: has really enabled them.

Speaker Change: to enhance their performance.

Speaker Change: And I think just repetition, using the tools that we have.

Speaker Change: And then just making sure that we don't have any real disruption to what the organization needs to be focused on. And I think we've done a nice job of keeping the teams focused.

Brian R. Niccol: And I think we've done a nice job of keeping the teams focused. You know, if you look at our leadership hierarchy, I think you talk to anybody in the operational leadership hierarchy, they all know we want great deployment. We want great cuisine. We want great throughput. We want great culture, and, you know. Like you, I wish it would go faster.

Speaker Change: You know, if you look at our leadership hierarchy, I think you talk to anybody in the operational leadership hierarchy, they all know we want great deployment, we want great culinary, we want great throughput, we want great culture, and you know,

Brian R. Niccol: I'm sure the good news is, Bill, we're making progress, and, you know, that's what I continue to keep an eye on, and I continue to make sure that we're staying consistent with our message, and we're supporting the teams with tools to set them up for success. The next question comes from Christine Cho with Goldman Sachs; please go ahead. Thank you so much.

Speaker Change: Like you, I wish it would go faster. I'm sure the good news is, Bill, we're making progress and, you know, that's what I continue to keep an eye on and I continue to make sure that we're staying consistent with our message and we're supporting the teams with tools to set them up for success.

Speaker Change: The next question comes from Christine Cho with Goldman Sachs. Please go ahead.

Hyun Jin Cho: Congratulations, Jack and Adam, and congratulations on a great quarter. I just wanted to pick your brain on the overall industry trying to win traffic share with, you know, discounts and promotions. And I think you mentioned that Chipotle's value proposition is still very strong, but do you see any shift within the consumers that you can highlight? And specifically, question for Brian: I think the last instance when we had this pretty fierce price competition, you were kind of on the other side of the fence. So, any key lessons you would take away from that experience back then and how that applies to your plans going forward in navigating this environment? Thank you. Yeah. So look, there's a lot there.

Christine Cho: Thank you so much. Congratulations, Jack and Adam, and congrats on a great quarter. I just wanted to pick your brain on the overall industry trying to win traffic share with discounts and promotions. And I think you mentioned that Chipotle's value proposition is still very strong.

Brian: But do you see any shift within the consumers that you can highlight? And specifically, I think, a question for Brian , I think the last instance when we had this pretty fierce price competition, you were kind of on the other side of the fence. So any key lessons you would take away from that experience back then, and how that applies to your plans going forward in navigating through this environment? Thank you.

Brian: yeah so look up there's a lot there but I'll start with

Brian R. Niccol: But I'll start with, I think I've said this over and over again, the thing that we need to make sure we do really well is great food, great burritos and bowls, and treasure every single guest that comes into our restaurant, whether it's in line or online. And when we do that, we see our value scores and our brand become more loved. And, you know, one of the things that I keep an eye on closely is whether we are gaining market share.

Brian: I think I've said this over and over again.

Brian: The thing that we need to make sure we do really well is great culinary, great burritos and bowls, and treasure every single guest that comes into our restaurant, whether it's in line or online. And when we do that, we see our value scores and our brand become more loved.

Brian R. Niccol: And what's great to see is we're gaining market share every month. Okay, so as we stay focused on executing Chipotle's core business, we see the results not only in the comp and transactions that we're, you know, delivering, but also in the market share gains that we're making. And, you know, I've said this before, Chipotle's not built on this idea of, you know, promotional football

Speaker Change: And, you know, one of the things that I keep an eye on closely is, are we gaining market share? And what's great to see is, we're gaining market share every month. Okay, so as we stay focused on executing Chipotle's core business...

Speaker Change: We see the results not only in the comp and transactions that we're, you know, delivering, but also the market share gains that we're making.

Speaker Change: And, you know, I've said this before, Chipotle's not built on this idea of, you know, promotional...

Operator: Chipotle's built on this idea of great food, exactly how you want it, and with great speed. And, you know, look, Steve had a simple idea: great food done fast. If we keep executing against that simple idea, I think we'll continue to get market share, and I think our value scores will continue to go up, and our teams will continue to be successful. And, you know, obviously, we've got to let other people play how they want to play; we're going to play our offense throughout this whole process. The next question comes from Sharon Zackfia with William Blair. Please go ahead. Hi, good afternoon.

Speaker Change: footballing prices, okay? Chipotle is built on this idea of great culinary, exactly how you want it, and with great speed, and you know...

Speaker Change: Look, Steve had a simple idea. Great food, done fast. We keep executing against that simple idea. I think we'll continue to get market share and I think our value scores will continue to go up and our teams will continue to be successful and you know.

Speaker Change: Obviously, we've got to let other people play how they want to play. We're going to play our offense throughout this whole process.

Speaker Change: The next question comes from Sharon Zackfia with William Blair. Please go ahead.

Sharon Zackfia: Thanks for taking the question. I guess just following up on that, I think in the prior few quarters, you had talked about kind of outperforming amongst lower-income consumers. And I apologize if you mentioned that. It's a really choppy connection on my end.

Sharon Zackfia: Hi, good afternoon. Thanks for taking the question.

Sharon Zackfia: I guess just following up on that, I think in the prior few quarters you had talked about

Sharon Zackfia: kind of outperforming amongst lower income consumers. And I apologize if you mentioned that it's a it's a really choppy connection on my end. But are you still seeing that kind of?

Brian R. Niccol: But are you still seeing that kind of strength across income cohorts? And on the brisket, is that something we should expect, Jack, to impact the fourth quarter as well?

Sharon Zackfia: strength across income cohorts. And on the brisket, is that something we should expect, Jack, to impact the fourth quarter as well? Thanks.

John R. Hartung: The good news is that we are seeing transaction growth from every income cohort, which I think speaks to the strength of our brand and our value proposition. And then, you know, as we continue to march forward, our goal is to continue to give people the bowls and burritos that they want at the speed that really delights them. So hopefully, that continues to resonate with every income cohort. To date, it has. And from what we see in our consumer research, it will continue to delight every income cohort. On your brisket question, I'll let Jack jump in on that.

Jack: So I'll answer your first question. The good news is we are seeing transaction growth from every income cohort, which I think speaks to the strength of our brand and our value proposition.

Speaker Change: and then...

Jack: You know, as we continue to march forward.

Speaker Change: Our goal is to continue to give people the bowls and burritos that they want at the speed that really delights them.

Speaker Change: Hopefully that continues to resonate with every income cohort. To date it has and from what we see in our consumer research it will continue to delight every income cohort.

John R. Hartung: Yeah, Sharon, what I can tell you is there will be an impact, but there's other things going on as well. So our food costs, we expect our food costs to be similar in Q4 to Q3, so not another step up. Thank you. The next question comes from John Ivankoe with J.P. Morgan. Please go ahead.

Jack: On your brisket question, I'll let Jack jump in on that one. Yeah, Sharon, what I can tell you is there will be an impact, but there's other things going on as well. So our food costs, we expect our food costs to be similar in Q4 as Q3, so not another step up.

Jack: Thank you.

Speaker Change: The next question comes from John Ivankoe with J.P. Morgan. Please go ahead.

John William Ivankoe: Hi. Thank you. The question, excuse me, was on the automated digital make line. You know, just in terms of what you've seen in your Cultivate Center and your Culinary Center, how scalable is this machine? In other words, if you do decide, and like what you see in the StageGate process, how fast could this potentially be nationally?

John Ivanko: Hi, thank you. You know, the question, excuse me, was on the automated digital make line. You know, just in terms of...

John Ivanko: What you've seen in your Cultivate Center and your Culinary Center, how scalable is this machine? In other words, if you do decide, and like what you see in the StageGate process, how fast could this potentially be nationally? Does your equipment supplier have the capacity to get up and running for the entire system?

Brian R. Niccol: Do your equipment supplier have the capacity, you know, to kind of get up and running for the entire system? It's kind of the, you know, first question. And then secondly, and related to that, you know, if we are talking about, you know, consistency and speed as being, you know, two things that you want to do really well, it does seem like an automated production line would be perfect for that, not just on the digital production line but even putting it into the front counter as well, whether kiosk ordering or app ordering or whatever that case may be.

John Ivanko: is kind of the first question. And then secondly, and related to that, you know, if we are talking about consistency and speed as being two things that you want to do really well, it does seem like an automated make line would be perfect for that, not just on the digital make line, but even putting it into the front counter as well, whether kiosk ordering or app ordering or whatever that case may be. Would that be considered as part of an early stage gate process as well once you establish it on the back make line? Thank you.

Brian R. Niccol: You know, would that be considered, you know, as part of an early StageGate process as well once you establish it on the back make line? Yeah, and thanks for the question. Obviously, we're really excited about Python and the automated digital make line. We will have that in a restaurant probably here at the end of August or early September, somewhere around there, which will be really exciting to see.

Speaker Change: Yeah, and thanks for the question. Obviously, we're really excited about Python and the automated digital make line. We will have that in a restaurant, probably here at, you know,

Brian R. Niccol: You know, look, obviously, we want to stay after consistency and speed. Those are two equities of the brand that are really important. The good news is we've got a bunch of different initiatives in the stage gate process. So, you know, look, I never like to have all my eggs in one basket, right?

Speaker Change: The end of August , early September , somewhere around there, which will be really exciting to see.

Speaker Change: You know, look, obviously we want to stay after consistency and speed. Those are two equities of the brand that are really important. The good news is...

Speaker Change: We've got a bunch of different initiatives in the State's Gate process. So, you know, look, I never like to have all my eggs in one basket, right?

Brian R. Niccol: And what I'm really delighted about is we have things that make us more efficient with prep, whether it's avocado, a veggie slicer, a dual-sided grill, you know, looking at modifications to our rice cooker, and our fryer equipment. So there's a lot of things going on back at house to make us more effective culinary wise, and prep wise, which then sets us up to be successful consistently on the front line and the digital production line. I've talked about these things before, where we're also experimenting with AI and vision to ensure that our teams get the support. You know, I'm actually reading a great book right now.

Speaker Change: What I'm really delighted about is we've got things that make us more efficient with prep, whether it's avocado, a veggie slicer, a dual-sided grill, you know, looking at modifications to our rice cooker, our fryer equipment. So there's a lot of things going on back at house to make us more effective.

Speaker Change: Culinary-wise...

Speaker Change: PrepWise, which then sets us up to be successful consistently on the front line and the digital make line.

Speaker Change: I've talked about these things also where we're also experimenting with AI and vision to ensure that our teams get the support. I'm actually reading a great book right now. It's called Cointelligence. It talks about how you use AI as a partner.

Brian R. Niccol: It's called Co-Intelligence. It talks about how, you know, you use AI as a partner, and that's really what, you know, you've heard us talk about this being co-biotics, right? I think now this is, I like this term co-intelligence to help our teams be more effective at forecasting, executing every single bowl correctly, and bringing things up exactly correctly. So, look, I'm really excited about all the things we have in the pipeline. Obviously, we've spent a lot of time talking about hyping because it's probably the most visible. It looks pretty darn cool, too, but I just want to make sure it's important.

Speaker Change: And that's really what, you know, you've heard us talk about this, is cobiotics.

Speaker Change: I think now this is, I like this term co-intelligence, to help our teams be more effective with forecasting,

Speaker Change: executing every single bowl correctly, bringing things up exactly correctly.

Speaker Change: Look, I'm really excited about all the things we have in the pipeline.

Speaker Change: Obviously we've spent a lot of time talking about hyping because it's probably the most visible, it looks pretty darn cool too, but I just want to make sure it's important we talk about like, we've got a lot of things from an innovation standpoint that really understand the operating model to make us more efficient.

Brian R. Niccol: We talked about, like, we've got a lot of things from an innovation standpoint that really understand the operating model to make us more efficient. Better cuisine every single time, consistent every single time, and frankly, makes the job easier for our team members to be successful, which then results in, I think, great outcomes for our customers. So, you know, a bit more answer to your question, but I think it's important to just highlight, you know, Hyphen's a great tool, but there are a lot of tools we're working on that I think are going to make us better in the future. That's great. And Jack, congratulations.

Speaker Change: better culinary every single time, consistent every single time, and frankly makes the job easier for our team members to be successful, which then results in, I think, great outcomes for our customers.

Speaker Change: You know, a bit more answer to your question, but I think it's important to just highlight, you know, Hyphen's a great tool, but there's a lot of tools we're working on that I think are going to make us better in the future.

Jack: That's great. Jack, congratulations.

John William Ivankoe: Thanks, John. The next question comes from Andrew Charles with T.D. Collin.

Jack: Thanks, John .

Speaker Change: The next question comes from Andrew Charles with TD Collin. Please go ahead.

Andrew Michael Charles: Please go ahead. Great, thank you. And just like everyone else, congratulations to both Jack and Adam. You know, Jack, what a ride it's been. Jack, curious about the guidance, you know, why keep the mid-single digit part just given the blowout from 2Q as well as the fact that sounds like July, you know, spotty, but around that 6% trend, you know? That mid-single digit piece suggests a pretty wide range of outcomes for the back half of the year. It implies some deceleration potentially coming. So can you talk more about the guidance philosophy? Yeah, I mean, there's two things going on.

Andrew Michael Charles: Great, thank you. And just like everyone else, congrats to both Jack and Adam. Jack, what a ride it's been.

Andrew Michael Charles: Jack, curious just with the guidance, you know, why keep the mid-single-digit part just given the blowout from 2Q as well as the fact that sounds like July , you know, spotty, but around that 6% trend, you know, that mid-single-digit piece suggests a pretty wide range of outcomes for the back half of the year and implies some deceleration potentially coming, so can you talk more about the guidance philosophy?

John R. Hartung: One is, like we said, since the pandemic, the summer months have been more difficult to predict, like, you know, the first year when you'd have the normal going back to school and, or, you know, leaving school and then going back to school. That was very, very different last year. This year, vacations were pulled forward again. It looks like they've even stepped up again. So there's difficulty in predicting seasonality.

Speaker Change: Yeah, I mean, there's there's two things going on. One is, like we said, since the pandemic, the summer months have been more difficult to predict, like

Speaker Change: You know, the first year when...

Speaker Change: You've had the normal going back to school and, or you know, leaving school and then going back to school. That was very, very different last year.

Speaker Change: [inaudible]

John R. Hartung: The other thing to keep in mind is that we do have 300 base points of pricing rolling off. So, now, what we hope to do is, hopefully, in a couple of quarters, talk about how the guidance ended up being perhaps on the conservative side. But right now, with everything that's going on, whether it's seasonality or something that's more of a, you know, a bigger approach or a bigger impact on the consumer, we think this is the right guidance level, and our intent is to give you a little bit more granularity in terms of, you know, what the months are looking like, to give you kind of an idea of what we're seeing, you know, That was in big demand the first time. We actually just couldn't keep it in stock.

Speaker Change: The guidance ended up being perhaps on the conservative side, but right now, with everything that's going on...

Speaker Change: Whether it's seasonality or something that's more of a, you know, a bigger approach or bigger impact.

Speaker Change: on the consumer, we think this is the right guidance level. And our intent in giving you a little bit more granularity in terms of what the months are looking like is to give you kind of an idea of what we're seeing right now, and I think with you know, with brisket...

John R. Hartung: We ran out of it so fast. We're optimistic, but we also want to be cautious in this environment. That's helpful. And in past years, you know, before the inflation issue, you know, we saw that there was typically about a 2% price increase, 2.5% price increase taken in December. You know, what's the likelihood we see that again next year?

Speaker Change: Coming up, we're very optimistic. That was a big demand the first time. We actually just couldn't even keep it in stock. We ran out of it so fast. We're optimistic, but we also want to be cautious in this environment.

Speaker Change: That's helpful. And in past years, you know, before the inflation issue, you know, we saw that there was typically about a 2% price increase, 2.5% price increase taken in December. You know, what's the likelihood we see that again for next year? I know you're seeing some temporary margin headwinds, but as we think about pricing levels for next year, I mean, what's the likelihood we see something come in December?

John R. Hartung: I know you're seeing some temporary margin headwinds. But as we think about pricing levels for next year, I mean, what's the likelihood we see something coming in December? Well, that's a long time away. I assume you're thinking December 2025. That's a long ways away.

Speaker Change: Well, that's a long time away. I assume you're thinking December 2025.

John R. Hartung: In this environment, we love the idea of being able to get through the rest of this year without a price increase. Where we would feel better in terms of the timing of a price increase is in an environment where the economy is robust and healthy. The consumer is feeling very, very healthy, and they're spending, and the restaurant industry, in general, is going well. And transactions are accelerating, not decelerating. That's a great environment when you do see inflation take a modest increase, 2%.

Speaker Change: That's a long ways away.

Speaker Change: In this environment, we love the idea of being able to get through the rest of this year.

Speaker Change: without a price increase.

Speaker Change: where we would feel better in terms of the timing of a price increase is in an environment where the economy is

Speaker Change: Robust and Healthy the Consumer

Speaker Change: is feeling very, very healthy and they're spending and...

Speaker Change: The restaurant industry in general is going well. And transactions are accelerating, not decelerating. That's a great environment when you do see inflation, to take a modest increase, 2%.

John R. Hartung: Our price increases have gone well, but we would not want to take that for granted. So I think it would be really data-dependent, like what's going on in inflation, but, as importantly, what's going on with the consumer, and what's going on with transaction trends. That's helpful, thank you. The next question comes from Lauren Silberman with Deutsche Bank. Please go ahead. Thanks a lot.

Speaker Change: Our price increases have gone well, but we would not want to take that for granted, so I think it would be really data-dependent, like what's going on in inflation, but as importantly, what's going on with the consumer, what's going on with transaction trends.

Speaker Change: That's helpful, thank you.

Speaker Change: The next question comes from Lauren Silberman with Deutsche Bank. Please go ahead.

Lauren Danielle Silberman: I wanted to ask about the LTO strategy. You have one in spring and one in fall. It just seems like you generally do the LTO comp, for lack of a better phrase, pretty consistently. What enables you to keep growing LTOs year over year, incidence rates growing each year? And do you tend to see that during the period of the LTOs, comps actually accelerate even though it's off a higher base? Yeah, so look, the good news is, you know, we have a nice mix on our menu of items that we've done in the past, as well as completely new menu items.

Lauren Danielle Silberman: Thanks a lot. I wanted to ask on the LTO strategy. You have one spring, one in fall. It just seems like you generally comp the LTO comp, for lack of a better phrase, pretty consistently.

Lauren Danielle Silberman: What enables you to keep growing LTOs year over year, incidence rates growing each year? Do you tend to see like during the periods of LTOs that comps actually accelerate even though it's off a higher base?

Speaker Change: yeah so look the good news is you know we have a nice mix

Speaker Change: with our menu news of items that we've done in the past as well as completely new.

Lauren Danielle Silberman: And I think what we've demonstrated is when we go back to something like chicken al pastor or carne asada, we seem to be able to talk about it in a much more exciting way, maybe than we did the original time, because we learned some things about it. We execute better because we, you know, know how to train on it, the teams are familiar with the execution.

Speaker Change: menu items. And I think what we've demonstrated is when we

Speaker Change: Go back to something like a chicken al pastor or carne asada.

Speaker Change: Thank you.

Speaker Change: We seem to be able to, you know, talk about it in a much more, you know, exciting way maybe than we did the original time because we learned some things on it. We execute better because...

Speaker Change: We know how to train on it, the teams are familiar with the execution. So that's been really nice to see. The one thing I want to remind everybody on all these things though is, one of the ways to make all these initiatives much more effective, great at operational execution.

Brian R. Niccol: So that's been really nice to see. The one thing I want to remind everybody about all these things, though, is one of the ways to make all these initiatives much more effective at operational execution. If we have terrific throughput, terrific deployment, and we execute the culinary really well, the menu innovation, you know, gets amplified because we give our guests a great experience. So, you know, it does a great job of bringing in incremental customers and incremental transactions. But, you know, if we have soft operations, these efforts won't be nearly as effective.

Speaker Change: If we have terrific throughput, terrific deployment, and we execute culinary really well, the menu innovation...

Speaker Change: You know, just amplified.

Speaker Change: because we give our guests a great experience. So, you know, it does a great job of bringing in incremental customers, incremental transactions.

Speaker Change: But, you know, if we have soft operations, these efforts won't be nearly as effective. So I really think it's a combination of stronger operations than, you know, maybe the last time when we executed this program, combined with, I think, a more...

Brian R. Niccol: So I really think it's a combination of stronger operations than, you know, maybe the last time when we executed this program, combined with, I think, a more, you know, informed marketing program than we did the prior time. So that's one of the things I love about this organization. We're committed to learning. We're committed to always figuring out how we can be better. And I think that's what you see coming out of Chipotle time and time again. Great, thanks.

Speaker Change: You know, informed marketing program than we did the prior time. So, that's one of the things I love about this organization. We're committed to learning. We're committed to always figuring out how we can be better. And I think that's what you see coming out of Chipotle time and time again.

Lauren Danielle Silberman: If I could just do a quick follow-up on the 3Q guide. I understand a lot of noise, but can we assume that the 25% restaurant level margin guide implies about a 6% underlying comp for the quarter? That's a fair assumption.

Speaker Change: Great. Thanks. If I could just do a quick follow-up on the 3Q guide. I understand a lot of noise, but can we, is it safe to assume that the 25% restaurant level margin guide implies about a 6% underlying comp for the quarter? That's a fair assumption. Yeah, you're in the ballpark.

John R. Hartung: Yeah, you're in the ballpark. Thank you. The next question comes from John Tower with Citi. Please go ahead.

Speaker Change: Thank you very much.

Speaker Change: The next question comes from Jon Tower with Citi. Please go ahead.

Jon Michael Tower: Great, thanks for taking the question and congrats, Jack and Adam. Maybe just a quick follow-up and then a question. First, you had mentioned earlier the generous portion stuff that you're going to be doing in the short term. Are you doing anything to communicate that to the consumer? You know, maybe something beyond what, Brian, you've already done on social media.

John Tower: Great, thanks for taking the question and congrats Jack and Adam.

John Tower: Maybe just a quick follow-up and then a question first.

John Tower: You had mentioned earlier the generous portion stuff that you're going to be doing in the short term. Are you doing anything to message that to the consumer? You know, maybe something beyond what, Brian , you've already done on social media. And then, I guess my question is more along the lines of, you know, there's obviously been a fairly significant price increase in California because of the wage rate.

Brian R. Niccol: And then I guess my question is more along the lines of, you know, there's obviously been a fairly significant price increase in California because of the wage rate hikes. Any sort of change in consumer behavior in that market that you're seeing at your stores or perhaps, you know, more broadly across the industry that you could speak to? So, look, your first question, part of the reason why we went and looked across the system was when we got feedback on the portion sizes.

John Tower: Hikes. Any sort of, you know, change in consumer behavior in that market that you're seeing at your stores or perhaps, you know, more broadly across the industry that you could speak to?

Speaker Change: So, look, your first question, you know, part of the reason why, you know, we went and looked across the system was when we got the feedback on the portion sizes.

Brian R. Niccol: We've always felt the key equity of Chipotle is, you know, these generous portion sizes. So we wanted to make sure we're executing consistently across the system. And we probably found about 10% or more of restaurants that we really view as outliers that needed to be, you know, retrained, and recoached to be executing against what we believe are the right standards.

Speaker Change: We've always felt the key equity of Chipotle is, you know, these generous portion sizes. So we wanted to make sure we were executing consistently across the system.

Speaker Change: Now, we've probably found about 10% or more of restaurants that, you know, we really view as outliers that needed to be, you know, retrained, re-coached to be executing against what we believe are the right standards.

Brian R. Niccol: At the same time, you know, we collectively said, look, we do not want to go back one inch on that equity of generous portion sizes. So we re-communicated it to the entire system. And, you know, look, I'm already seeing it on social media, people commenting on it.

Speaker Change: At the same time, you know, we collectively said, look, we do not want to go back one inch on our, on that equity of generous portion sizes. So we re-communicated to the entire system. And you know, look, I'm already seeing it in social media, people commenting on.

Brian R. Niccol: The burritos, the bowls that they're getting, and, you know, I think that is the best source of marketing, word of mouth, as people have these experiences with Chipotle. But the thing I want to emphasize is that 90% of our restaurants are doing business as usual, you know, so I just, I don't want it to be lost on the fact that, you know, this really was something where we doubled down as a system, but we really needed to kind of train up roughly 10% of the system.

Speaker Change: the burritos, the bowls that they're getting and you know I think that is the best source of marketing is the word of mouth as people have these experiences with Chipotle.

Speaker Change: But the thing I want to emphasize is

Speaker Change: For 90% of our restaurants, they're doing business as usual. So I don't want it to be lost on the fact that this really was something where we doubled down as a system, but we really needed to kind of train up roughly 10% of the system.

Brian R. Niccol: So, you know, I think it's going to continue to be a key equity of ours, and as I mentioned in my prepared remarks, it's an equity we care about. So we'll invest in it, and we'll figure out how to make sure we consistently do it every day. And then on California, I'll make a comment or two.

Speaker Change: [inaudible]

John R. Hartung: So, yeah, what we've seen is that across the entire state, we've seen a step down in the industry. We've seen individual data points within the individual restaurants, and we've seen reports that there really has been a pullback in spending. We've seen it as well. But we've also seen that when we look at individual restaurants, there's not a correlation between the step back in spending versus the menu price increase that was taken. And so it looks like there's just kind of a macro impact of less spending in restaurants. We saw the same thing. Now, unfortunately, we raise prices by 100 basis points. However, we normally don't see much resistance.

Speaker Change: And then on California, I'll make a comment or two. So yeah, what we've seen is really across the entire state, we've seen a step down in the industry. We've seen individual data points.

Speaker Change: within the individual restaurants, and we've seen reports that there really has been a pullback in spending.

Speaker Change: We've seen it as well. We've also seen that when we've seen individual restaurants, there's not a correlation between the step back in the spending versus the major price increase that was taken. And so it looks like there's just kind of a macro impact of less spending in the restaurant. We saw the same thing. Now, unfortunately, you know, we raised prices by 100 basis points. We normally don't see much resistance. We saw resistance to the point where we didn't get the 100 basis points at all. So we saw a pullback that equaled the effective vendor price increase that we took. And it looks like that's about equal to what the pullback in the industry is.

John R. Hartung: We saw resistance to the point where we didn't get the 100 basis points at all. So we saw a pullback that equaled the effective menu price increase that we took. And it looks like that's about equal to what the pullback in the industry is.

Jon Michael Tower: Thanks for taking the questions. The next question comes from Brian Harbour with Morgan Stanley. Please go ahead. Thanks, yeah, good afternoon. Check it out, Adam. The Barbacoa kind of marketing initiative, could you just comment on that? Was it kind of a pretty material driver?

Speaker Change: Got it. Thanks for taking the questions. Sure.

Speaker Change: The next question comes from Brian Harbour with Morgan Stanley . Please go ahead.

Brian R. Niccol: Did people respond as you expected? Are there kind of other op- Yeah, look, that was really effective. I think the marketing team did a great job of informing people of a great product that we have on our menu all the time. And as a result, we saw incidents go up. And, you know, I think it's going to be something we'll revisit in the future. The good news is we've got another hidden gem, I think, with carnitas, that we'll evaluate as well.

Brian James Harbour: Thanks, yeah, good afternoon, and Jack and Adam, congratulations as well. The Barbacoa kind of marketing initiative, could you just comment on that? Was it kind of a pretty material driver? Did people respond as you expected? Are there kind of other opportunities to do that sort of thing?

Speaker Change: Yeah, look, that was really effective. I think the marketing team did a great job of...

Speaker Change: informing people of a great product that we have on our menu all the time and as a result we saw incidents go up.

Speaker Change: And, you know, I think it's going to be something we'll revisit in the future. The good news is we got another hidden gem, I think, with carnitas that we'll evaluate as well. But, yeah, you'll probably see us do that again because it worked really well for us.

Brian R. Niccol: But yeah, you'll probably see us do that again, because it worked really well. Brian, your comments on automation but also some of the other things, and there's... How, um... You know, how fast do you think some of those can show up? Is this the sort of thing where we start... You know, see it in a year or two, or some of these longer terms, do we see it, you know, in the form of kind of continued margin upside, or like, how should we kind of assess it?

Speaker Change: Okay, great. And Brian , your comments on...

Brian James Harbour: automation but also some of the other kind of you know initiatives that that you mentioned how

Brian James Harbour: You know, how fast do you think some of those can show up? Is this the sort of thing where we start to, you know, see it in a year or two? Or are some of these longer term? Do we see it, you know, in the form of kind of continued margin upside? Or like how should we kind of assess some of those as outsiders?

Brian R. Niccol: Yeah, look, I think like you would expect with any good portfolio of ideas we have, short term, medium term, and longer term, right? And some of those things are much closer in versus something like a hyphen, which is a little bit further out.

Speaker Change: Yeah, look, I think, like you would expect, with any good portfolio of ideas, we have

Speaker Change: short-term, medium-term, and longer-term right and some of those things are much closer in versus something like a hyphen is a little bit further out and you know

Brian R. Niccol: And you know, the thing that's great is we're validating all of it through the stage gate. This is one of the things I love about the stage gate process, because it doesn't slow things down. It just ensures we don't have any unintended consequences so that as we roll things out, we're informed about what we're executing. But yeah, some of those things can happen on much faster timelines, and some of the other things take a little bit longer.

Speaker Change: The thing that's great is we're validating all of it through the stage gate. This is one of the things I love about the stage gate process is it doesn't slow things down, it just ensures we don't have any unintended consequences.

Speaker Change: so that as we roll things out we're informed with what we're executing. But yeah, some of those things can happen on much faster timelines and some of the other things take a little bit longer. So it's a real, it's a really nice blend of I would say near-term, mid-term, and long-term.

Brian R. Niccol: So it's a real, it's a really nice blend of, I would say, near-term, mid-term, and long-term. The next question comes from Danilo Gargiulo with Bernstein. Please go ahead.

Speaker Change: The next question comes from Danilo Gargiulo with Bernstein. Please go ahead.

Danilo Gargiulo: Thank you. Brian, the last time we discussed it, you were talking about throughput that was in the mid-20s. Why are you here today, and can you maybe help us understand the major catalyst of throughput acceleration from here on? Yeah, sure. So, you know, obviously, we saw our biggest improvement in throughput during the month of April, which was great to see. And we continue to see great throughput execution from folks. The thing that's going to push the throughput forward even further is, ultimately, the deployment being done correctly.

Danilo Gargiulo: Thank you. Brian , last time we discussed, you were talking about throughput that was in the mid-20s. Where do you stand today and can you maybe help us understand the major catalyst of throughput acceleration from here on?

Brian R. Niccol: So if we get that expo number to a higher percentage, not surprisingly, that expo position has the biggest impact on throughput, and so that's why you hear us talking about that position being kind of like the key metric of whether we are deployed correctly to execute great throughput during peak. So I'm optimistic that we're going to move that 50 percent number up, and I'm optimistic that we will be able to move from the mid-20s to the high-20s in the not-too-distant future. Great

Speaker Change: Yeah, sure. So, you know, obviously we saw our biggest improvement in throughput during the month of April , which was great to see. And we continue to see great throughput execution from folks.

Speaker Change #100: The thing that's going to push the throughput forward even further is ultimately the deployment being done correctly, right? So if we get that Expo number to a higher percentage, not surprisingly, that Expo position is the biggest impact on throughput gains.

Speaker Change #100: And so that's why you hear us talking about that position is kind of like the key metric of are we deployed correctly to execute great throughput during peak. So I'm optimistic that we're going to move that 50% number up and I'm optimistic that you know we'll be able to move from the mid 20s to the high 20s in the not-too-distant future.

Brian R. Niccol: And can you please provide an update on the restaurant-level margins and demand that you're seeing in European markets? I mean, you're making some bold investments over there, changing leadership as well. So when do you think it's going to be realistic to expect an acceleration in units in Europe as well?

Speaker Change #101: Great. And can you please provide an update on the restaurant-level margins and demand that you're seeing in European markets? I mean, you're making some bold investments over there, changing leadership as well. So when do you think it's going to be realistic to expect an acceleration in units in Europe as well?

Brian R. Niccol: Yeah, look, I'm really excited about the progress that our team has made over in Europe in really short order. You know, they've taken a lot of the tools in the U.S. and put them into place in Europe. I think we're managing food better, we're managing the supply chain better, and we're managing deployment better. The culinary, I think, has really improved. So, not surprising, we're seeing nice improvements both on the top line and the bottom line.

Speaker Change #102: Yeah, look, I'm really excited about the progress that our team has made over in Europe in really short order.

Speaker Change #103: You know, they've taken a lot of the tools in the U.S., we've put them into place in Europe .

Speaker Change #104: I think we're managing food better, we're managing the supply chain better, managing deployment better, the colon area I think is really improved. So not surprising, we're seeing nice improvements both in top line and bottom line.

Brian R. Niccol: So, you know, I'm optimistic that we're going to be proving those as investable markets to kind of go even faster down the road, similar to what happened in Canada. So the team's making nice progress. I'm sure they'll be busy in Paris with the Olympics coming up, but I'm really, really delighted with what Ben and Anat have done in kind of short order. And our last question will come from Chris O'Coole with CFL. Please go ahead.

Speaker Change #104: So, you know, I'm optimistic that we're going to be proving...

Speaker Change #104: Those as investable markets to kind of go even faster

Speaker Change #104: down the road.

Speaker Change #104: similar to what happened in Canada. So the team's making nice progress.

Speaker Change #105: I'm sure they'll be busy in Paris with the Olympics coming up.

Speaker Change #106: And our last question will come from Chris O'Call with FIFO. Please go ahead.

Chris O'Coole: Thanks and congratulations, Jack and Anna. I just wanted to ask, Brian, do you see any signs that the increase in value promotions by these QSR chains has had any impact on the company's results? You know, we really haven't, and I kind of point to the fact that we're gaining market share, according to the data we get back. And, you know, the brand metrics continue to strengthen, and one of those key strength components is our value proposition.

Chris O'Cole: Thanks and congratulations Jack and Adam. I just wanted to ask Brian , do you see any signs that the increase in value promotions by these QSR chains have had any impact on the company's results?

Brian James Harbour: You know, we really haven't, and I kind of point to the fact that we're gaining market share, you know.

Brian James Harbour: according to the data we get back and...

Brian James Harbour: You know the brand metrics continue to strengthen and one of those key strength components is our value proposition so when I kind of connect all the dots of you know

Chris O'Coole: So when I kind of connect all the dots of, you know, market share gains, strengthening the brands, strengthening our operational execution, you know, it appears some of these promotions are not having an impact on our business at this moment. So, you know, again, the thing we have to do is play our offense, and our offense, as I mentioned earlier, is great food, great teams, great throughput, and that results in great burritos and bowls for our customers.

Brian James Harbour: market share gains, strengthen the brand, strengthen our operational execution, you know.

Speaker Change #108: It appears some of these promotions are not having an impact.

Speaker Change #108: on our business as of this moment. So, you know, again, the thing we have to do is play our offense. And our offense, as I mentioned earlier, is great culinary, great teams, great throughput, and that results in great burritos and bowls for our customers.

Chris O'Coole: So we're gonna stay after it, you know, and if the environment gets tougher, the good news for us is that in the prior macro issues or recessions that we faced, Chipotle was one of the last ones impacted, and we were one of the first ones out of the slowdown. So it gives me confidence that we've got the right focus, the right operating model, and I think it's gonna continue to resonate with customers. It's very helpful.

Speaker Change #108: We're going to stay after it.

Speaker Change #108: The prior macro issues or recessions that we faced, Chipotle is one of the last ones impacted.

Speaker Change #108: And we were one of the first ones out of the slowdown. So.

Speaker Change #108: It gives me confidence that we've got the right focus, the right operating model, and I think it's going to continue to resonate with customers.

Brian R. Niccol: And just as a follow-up, you talked a lot about product innovation, which, obviously, has been very successful. And one of the factors, I think, Jack, or you had mentioned benefiting April sales was the marketing activation event. And I'm just wondering, can you help us understand how impactful these events can be and whether this is something the company could consider using more frequently if the consumer spending environment were to become more challenging? Yeah, look, it's a great question.

Speaker Change #108: It's helpful. And just as a follow-up, you know, you talked a lot about product innovation, obviously, that has been very successful, and one of the factors, I think, Jack, or you had mentioned,

Speaker Change #109: Benefiting April Sales was the marketing activation event and I'm just wondering can you help us understand how impactful these events can be and whether this is something the company could consider using more frequently and if the consumer spending environment were to become more challenging?

Brian R. Niccol: And this is really, I think, the power of our combination of, you know, our digital marketing slash digital consumer database combined with what I think are some really clever marketing moments, right, like National Burrito Day and National Avocado Day. You know, obviously, we have the ability to turn on guac mode; we have the ability to do other things that I think are very insight-based that we know resonate with the Chipotle customer.

Jack: Yeah, look, it's a great question, and this is really, I think, the power of our combination of...

Speaker Change #110: You know, our digital marketing slash digital or consumer database combined with what I think are some really clever

Speaker Change #111: marketing moments, right, like National Burrito Day, National Avocado Day.

Speaker Change #111: You know, obviously we have the ability to turn on guac mode, we have the ability to do other things that I think are very insight-based.

Speaker Change #111: that we know resonate with the Chipotle customer. And I think that's one of the things that's great about having such a big data base on our customers and then doing, I think, a really effective job.

Brian R. Niccol: And I think that's one thing that's great about having such a big data base on our customers and then doing, I think, a really effective job using, you know, digital marketing or traditional marketing tools to communicate these unique opportunities with our customers. So you'll continue to see us use it.

Speaker Change #111: using, you know, digital marketing or...

Speaker Change #111: traditional marketing tools to communicate these unique opportunities with our customers. So you'll continue to see us use it and I think it's a huge advantage that we have the strength of this loyalty program combined with a really talented marketing team.

Brian R. Niccol: And I think it's a huge advantage that we have, the strength of this loyalty program combined with really talented marketing. Great, thanks and congratulations, guys. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Brian Niccol for any closing remarks. All right, thank you.

Speaker Change #112: Great, thanks, and congratulations guys.

Speaker Change #113: Thank you.

Speaker Change #113: This concludes our question and answer session. I would like to turn the conference back over to Brian Niccol for any closing remarks.

Brian R. Niccol: And thanks, everybody, for all the questions. Again, I do want to recognize Mr. Jack Hartung for, you know, having the privilege of working with Jack, as well as, I think, Chipotle and everybody involved with Chipotle, as a huge thank you from Mr. Hartung. So, thank you again, Jack.

Brian R. Niccol: All right, thank you, and thanks everybody for all the questions. Again, I do want to recognize Mr. Jack Hartung on, you know, having the privilege to work with Jack, as well as, you know, I think Chipotle and everybody involved with Chipotle, as a huge thank you from Mr. Hartung. So thank you again, Jack.

Brian R. Niccol: And obviously, we're excited for Adam to step into the CFO role and then, obviously, Jamie McConnell stepping up into her chief accounting role. Terrific leaders under, again, Jack's leadership that are going to get the opportunity to make even bigger contributions to this great brand. So congratulations, everybody. And then on to the business.

Speaker Change #114: and obviously we're excited for Adam to step into the CFO role and then obviously Jamie McConnell stepping up into her chief accounting role. So terrific leaders under again Jack's leadership that are going to get the opportunity to make even bigger contributions to this great brand.

Brian R. Niccol: Obviously, it was an outstanding quarter. I couldn't be prouder of the results, the organization, and what we accomplished. You know, to get 8% transaction growth in any environment is pretty special.

Speaker Change #115: So congratulations, everybody. And then on to the business, honestly, it was an outstanding quarter. Couldn't be prouder of the results.

Speaker Change #115: The organization and what we accomplish, you know, to get 8% transaction growth in any environment.

Speaker Change #115: is pretty special and I think it's a testament. Great operations, great marketing, great digital. I mean, we've got a lot of things going the right way and as a result, the brand metrics have never been better, the value proposition is super strong. Whatever is in store for us, I'm sure we'll have our ups and downs.

Brian R. Niccol: And I think it's a testament to great operations, great marketing, great digital. I mean, we just, we've got a lot of things going the right way. And as a result, the brand metrics have never been better. The value proposition is super strong. And, you know, whatever is in store for us, I'm sure we'll have our ups and downs. I always go back to having a strong brand with a strong organization setting you up for success.

Speaker Change #115: I always go back to having a strong brand with a strong organization sets you up for success.

Speaker Change #115: and I'm confident that we are building from a position of strength.

Brian R. Niccol: And I'm confident that we are building from a position of strength, and I look forward to, you know, finishing the year strong. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change #115: And I look forward to, you know, finishing the year strong. Obviously, we've got a couple more quarters to go, but, you know, I just want to reemphasize what a great quarter, what a great team, and really proud of where we are and where we're headed. So, thank you, everybody.

Speaker Change #116: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.