Chipotle Mexican Grill(CMG) - 2024 Q2 - Quarterly Report

PART I - Financial Information Item 1. Financial Statements (Unaudited) Unaudited Q2 2024 financial statements show significant revenue and net income growth, with total assets increasing to $8.92 billion Condensed Consolidated Balance Sheets The condensed consolidated balance sheets reflect total assets of $8.92 billion and total shareholders' equity of $3.71 billion as of June 30, 2024 Condensed Consolidated Balance Sheets (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Total current assets | $1,786,298 | $1,620,713 | | Total assets | $8,919,835 | $8,044,362 | | Liabilities and Shareholders' Equity | | | | Total current liabilities | $1,043,156 | $1,030,625 | | Total liabilities | $5,208,015 | $4,982,155 | | Total shareholders' equity | $3,711,820 | $3,062,207 | | Total liabilities and shareholders' equity | $8,919,835 | $8,044,362 | Condensed Consolidated Statements of Income and Comprehensive Income The statements of income show Q2 2024 total revenue of $2.97 billion and net income of $455.7 million, with diluted EPS at $0.33 Condensed Consolidated Statements of Income (in thousands, except per share data) | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $2,973,117 | $2,514,801 | $5,674,966 | $4,883,381 | | Income from operations | $586,053 | $431,810 | $1,027,345 | $799,416 | | Net income | $455,671 | $341,790 | $814,958 | $633,434 | | Diluted earnings per share | $0.33 | $0.25 | $0.59 | $0.46 | Condensed Consolidated Statements of Shareholders' Equity Shareholders' equity increased to $3.71 billion by June 30, 2024, influenced by net income and a $5.19 billion treasury stock retirement - Total shareholders' equity increased from $3.06 billion at the end of 2023 to $3.71 billion as of June 30, 2024, driven by net income of $815.0 million for the six-month period[10] - During the second quarter of 2024, the company retired 507,166 shares of treasury stock, resulting in a reduction of $5.19 billion in treasury stock and a corresponding deduction from retained earnings[10][42] Condensed Consolidated Statements of Cash Flows Cash flow statements show $1.13 billion from operating activities and a net change of $248.0 million in cash for the first six months of 2024 Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,131,812 | $1,037,546 | | Net cash used in investing activities | $(637,254) | $(627,692) | | Net cash used in financing activities | $(245,408) | $(289,113) | | Net change in cash, cash equivalents, and restricted cash | $248,029 | $121,006 | Notes to Condensed Consolidated Financial Statements Notes detail key accounting policies, a 50-for-1 stock split, restaurant operations, unearned revenue, and an undrawn $500 million credit facility - On June 26, 2024, the company executed a 50-for-1 stock split, with all share and per-share data retroactively adjusted to reflect this split[17] - As of June 30, 2024, Chipotle operated 3,530 restaurants, including 3,460 in the U.S. and 70 internationally, plus one international licensed restaurant[16] Unearned Revenue from Loyalty and Gift Cards (in thousands) | Liability Type | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Gift card liability | $133,148 | $164,930 | | Chipotle Rewards liability | $49,183 | $44,750 | - The company has a $500 million revolving credit facility which remained undrawn as of June 30, 2024, and was in compliance with all covenants[58] - As of June 30, 2024, $647.7 million was authorized for future share repurchases, including an additional $400 million approved on June 5, 2024[42] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights strong Q2 2024 performance with 18.2% revenue growth and 11.1% comparable sales increase Second Quarter 2024 Financial Highlights (YoY) | Metric | Q2 2024 | % Change | | :--- | :--- | :--- | | Total Revenue | $3.0 billion | +18.2% | | Comparable Restaurant Sales | | +11.1% | | Diluted EPS | $0.33 | +32.0% | - The 11.1% increase in comparable restaurant sales was primarily driven by an 8.7% increase in transactions and a 2.4% increase in average check[64][70] - The company opened 52 new restaurants in Q2 2024, with 46 featuring a Chipotlane, targeting 285-315 new openings for the full year[65] - As of June 30, 2024, the company had $2.4 billion in cash and marketable investments and $647.7 million remaining under its share repurchase authorization[90] Results of Operations Q2 2024 results show 18.2% total revenue growth to $3.0 billion, driven by 11.1% comparable restaurant sales and improved operating cost leverage Revenue Performance (Q2 2024 vs Q2 2023) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Total Revenue | $2,973.1M | $2,514.8M | | Comparable Restaurant Sales Increase | 11.1% | 7.4% | | Transactions Growth | 8.7% | 4.4% | | Average Check Growth | 2.4% | 3.0% | - Food, beverage and packaging costs were flat at 29.4% of revenue in Q2 2024, as a 1.2% benefit from menu price increases was offset by inflation for avocados and higher beef incidence[72] - Labor costs as a percentage of revenue decreased by 0.2% to 24.1% in Q2 2024, with 1.5% benefit from sales leverage partially offset by 1.1% from wage inflation, including California's new minimum wage[74] - Other operating costs decreased by 1.0% as a percentage of revenue to 12.9% in Q2 2024, primarily due to sales leverage and lower delivery expenses[77] Liquidity and Capital Resources The company maintains strong liquidity with $2.4 billion in cash and investments, generating $1.1 billion in operating cash flow for the first half of 2024 - Cash provided by operating activities increased to $1.1 billion for the first six months of 2024, up from $1.0 billion in the same period of 2023, primarily due to higher net earnings[93] - Cash used in financing activities decreased to $245.4 million in the first half of 2024 from $289.1 million in 2023, mainly due to a $49.4 million decrease in treasury stock repurchases[94] - The company's primary uses of cash are funding new restaurant construction, share repurchases, and maintaining existing restaurants[90] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company manages market risks from commodity price volatility and interest rate fluctuations through various mitigation strategies - Chipotle is exposed to commodity price risks for its food ingredients and packaging, influenced by factors like weather, foreign demand, and exchange rates[98] - The company manages commodity risk through a mix of pricing protocols with suppliers, including fixed-price and formula-based agreements, for periods ranging from one to 24 months[98] - Interest rate risk exists due to the company's $2.5 billion in cash, cash equivalents, and investments, as changes in rates affect interest income[99] Item 4. Controls and Procedures Management affirmed the effectiveness of disclosure controls and procedures as of June 30, 2024, with no material changes to internal financial reporting controls - Based on an evaluation as of June 30, 2024, the Chief Executive Officer and Chief Financial and Administrative Officer concluded that the company's disclosure controls and procedures were effective[102] - No changes occurred during the quarter ended June 30, 2024, in the company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, it[103] PART II - Other Information Item 1. Legal Proceedings Legal proceedings information is referenced in Note 11, with no belief that current claims will have a material adverse effect - For details on legal proceedings, the report refers to Note 11 of the financial statements[104] Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the Annual Report on Form 10-K for December 31, 2023 - No material changes have been made to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023[107] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2024, the company repurchased 2.38 million shares at an average of $63.52, with $647.7 million remaining for future repurchases Share Repurchases in Q2 2024 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2024 | 94,050 | $63.73 | | May 2024 | 1,023,200 | $63.18 | | June 2024 | 1,265,467 | $63.79 | | Total Q2 | 2,382,717 | $63.52 | - As of June 30, 2024, the approximate dollar value of shares that may yet be purchased under the repurchase programs was $647.7 million[106] Item 3. Defaults upon Senior Securities The company reports no defaults upon senior securities - The company reports no defaults upon senior securities[109] Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - This item is not applicable to the company[109] Item 5. Other Information Chief Customer and Technology Officer Curt Garner adopted a new Rule 10b5-1 trading plan for the potential sale of up to 189,000 shares - On June 10, 2024, Chief Customer and Technology Officer Curt Garner adopted a new 10b5-1 trading plan for the potential sale of up to 189,000 shares of common stock[110] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - Exhibits filed with the report include CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1) and interactive data files (Exhibits 101 and 104)[113][114][115][116][117]