Chipotle Mexican Grill, Inc.

Ladies and gentlemen, thank you for your patience. We are ready to begin, and at this time I'd like to turn the call over to Mr. Ashish Kohli, Head of Investor Relations.

Hello, everyone, and apologies for the delayed opening. Welcome to our second quarter 2019 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, including projections about comparable restaurant sales growth, new store openings, our effective tax rate, and expected G&A expenses. 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. Please see the risk factors contained in our 2018 annual report on Form 10-K and in our subsequent 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 of these measures, the GAAP measures, can be found via the link included on the presentation page within the investor relations section of our website. We will start today's call with prepared remarks from Brian Nickell, Chief Executive Officer, and Jack Hartung, Chief Financial Officer, after which we will take your questions. Our entire executive leadership team is available during the Q&A session. With that, I'll turn the call over to Brian.

Thanks, Ashish, and good afternoon, everyone. We're pleased with our second quarter financial performance, which reflects continued progress on the strategic initiatives we discussed at our special investor call just over a year ago. Since that time, our efforts to highlight that Chipotle sources, cooks, and serves real food that has the power to cultivate a better world have led to a meaningful improvement in our business fundamentals. In fact, this marks the sixth consecutive quarter of accelerating comparable sales. which reinforces our view that when we connect with guests through culturally relevant marketing focused on Chipotle's great taste and real ingredients and provide more convenient access with less friction, they respond. For the quarter, we reported 10% comparable restaurant sales growth. That included nearly 7% transaction growth. Restaurant level margins of 20.9%, which is 120 basis points higher than last year. Earnings per share adjusted for unusual items of $3.99. representing 39% year-over-year growth, and digital sales growth of 99% year-over-year, representing 18.2% of sales. These strong results were delivered despite a tougher year-over-year comparison and benefited from better execution on four key initiatives we mentioned on last year's call. Specifically, revamping our marketing, creating a stage-gate process for innovations, leveraging our second make line to grow digital sales, and expand access, and engaging with our customers by launching a new loyalty program. All of these efforts are layered on top of our foundational work to run successful restaurants with great hospitality and throughput. Let me now spend a few minutes updating you on each of these initiatives. First, starting with our marketing efforts. We made sure to stay relevant throughout the quarter by celebrating our real ingredients and classic cooking techniques. Our Behind the Foil campaign resonated with guests by showcasing the connection between how food is raised and prepared to how it tastes by featuring our team members' pride in making delicious food daily. In addition, Q2 benefited from several strategic promotions that made the Chipotle brand more visible while helping expand access. An example was a free delivery promotion in conjunction with a prominent influencer to celebrate National Burrito Day on April 4th. Leveraging the social and digital experience helped make this the highest sales day in Chipotle history. More importantly, it was another opportunity to acquire customers and transactions by introducing them to the convenience of delivery. And we are seeing increased new customer retention with higher levels of delivery sales after the promotion. On the menu side, we are elevating our core by developing innovation that leads food culture and meets guest requests. Our lifestyle bowls remain popular with customers, and we continue to test new menu items that are in various stages of development. The furthest along is carne asada. which I am pleased to announce is nearing validation through our stage gate process, after which we will decide on the timing of a potential national launch. This item is easy to execute operationally, has a unique flavor profile, and is receiving terrific customer feedback in our test markets. We are also gaining valuable feedback on our quesadilla pilot, with the good news being that customers really love it. The new ovens are helping improve the quality and taste of the quesadillas and could potentially be a platform for other new menu items, including desserts and nachos. That being said, we still have some work to do in order to streamline our workflow. As I have stated previously, we are not going to roll out new menu items at the sacrifice throughput. We will update you on our progress of all potential new menu items as they move through our stage gate process. We are very excited about Chipotle Rewards, which launched on March 12th and has exceeded our expectations with over 5 million enrolled members. Encouragingly, these signups are across all frequency bands and we are starting to use customer data to more effectively target, and engage the incidence of lower frequency and lapsed users. Early results are showing that members are increasing their frequency after joining the program. The rewards program gives us a currency that we can use to incent behaviors and is a key enabler of our digital ecosystem moving forward. Our customers are responding positively to our digital system, which includes order ahead, delivery, and catering, as it reduces friction and creates a convenient and enjoyable way for our guests to experience Chipotle. Overall, digital sales grew 99% year-over-year to $262 million during the quarter and represented 18.2% of sales. To put this in perspective, this was more than we did in digital sales during all of 2016. Delivery remains a key driver of our digital growth given enhanced capabilities on our app and website, as well as our expanded reach. In fact, delivery is now available for more than 95% of our restaurants and remains highly incremental. We continue to see residual lift in delivery sales that last beyond any promotion, and I've seen very little guest overlap between our own in-app delivery and our third-party delivery partner apps. Additionally, with mobile order pickup shelves available in all relevant restaurants and digital make lines in nearly 2,000 restaurants, we are modernizing and making the customer and team member experience more efficient while building more love for Chipotle. With more customers coming to Chipotle restaurants, many of whom are new, it is imperative we provide a great guest experience. The operations team has made progress against this goal, partly as a result of our focus to make 2019 the year of the general manager. Specifically, we have a great company with a meaningful purpose that people want to be a part of. We have a culture of food safety, we are dedicated to training and developing talent, and we are enhancing our industry-leading employee benefits. In addition to our newly expanded tuition assistance program, you may have seen our recent announcement of a new crew bonus program. This gives hourly employees the opportunity to turn up to an extra month's pay each year based on the restaurant achieving certain performance and food safety goals. This is another example of investing in our most valuable asset, our people. As a result of these efforts, we believe our employee value proposition is resonating. Manager and crew turnover have come down nicely over the past year. Our food is being prepared more consistently through line tastings, and our result is being executed better. and we are seeing steady improvement in throughput, aided by training, focus, and providing our teams with an easy-to-use dashboard that provides greater visibility on performance. While I am encouraged by the progress thus far, I believe we still have a significant opportunity for further throughput gains. When done well, throughput isn't simply about moving people through the restaurant as quickly as possible. Instead, it's about outstanding customer service with clear, authentic communication as customers efficiently move down our serving line. I believe better execution on our five key pillars, which have historically been proven throughput drivers, will drive sales and transactions. Everyone at Chipotle believes real food can change the world, so we strive every day to do the right thing for our employees, for our customers, and for the environment. I would like to personally thank each of our team members for their tireless dedication and passion to make Chipotle's success. In closing, what really excites me is that I believe we are still in the early stages on many of our key initiatives, And by continuing to execute and get better, which we are committed to doing, Chipotle is well positioned for future growth. With that, here's Jack to walk you through the financials.