Chipotle Mexican Grill, Inc.

Good day and welcome to the Chipotle Mexican Grill fourth quarter and full year 2025 results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. 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 Olson, Head of Investor Relations. Please go ahead.

Hello, everyone, and welcome to our fourth quarter and full fiscal year 2025 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. Additionally, supplemental investor information is available on our site as a reference for today's call. 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. Please see the risk factors contained in our annual report on Form 10-K and in our Forms 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. We will start today's call with prepared remarks from Scott Bowright, Chief Executive Officer, and Adam Reimler, Chief Financial 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 Scott.

Good afternoon and thank you for joining us. Today I will spend a few minutes up front discussing the highlights of our financial results and Adam will cover the details. My remarks will cover a broader view into my vision for Chipotle and my deep confidence in our growth strategy, as well as opportunities we have to sharpen our competitiveness by harnessing the core values of our brand. The results we issued this afternoon were in line with expectations and guidance for the full year. 2025 should be seen as a year of progress and resilience for our brand. For the year, revenue grew 5.4% year over year, which included a 1.7% decline in comparable sales. Adjusted diluted earnings per share grew 4.5% year over year to $1.17. We opened a record 334 new company-owned restaurants and 11 international partner-operated restaurants. We also made progress in the strategic areas that matter most for our long-term success, including investing in operational excellence, marketing and menu innovation, deploying new back-of-house technology, and growing our footprint internationally. It's important to emphasize all this was achieved against a dynamic consumer backdrop. with our guests placing heightened focus on value and quality and pulling back on overall restaurant spending. This makes our investments in progress even more significant and highlights Chipotle's commitment to succeed through consumer cycles. With that in mind, I want to commend the incredible efforts of our teams for their thoughtful response and dedication during the recent winter storm. We have not seen a multi-state storm like this in many years, and our operational excellence and prioritization of speed and agility for instrumental and reopening restaurants as quickly and safely as possible to serve our guests. Turning to our path forward. Serving as Chipotle CEO is an incredible honor. From our guests to our people to our partners around the globe, there is a deep love for our brand and the food we serve. Over the past year, I've had the privilege of visiting Chipotle restaurants around the world. including our restaurants in Europe, Canada, as well as the opening of our City Walk restaurant in Dubai. These experiences have reinforced my conviction in our momentum and our ability to continue delivering exceptional service and elevated experiences for our guests in our restaurants. So what actions are we taking to build a stronger, more profitable Chipotle? Over the last several months, we conducted a comprehensive review of our business, as well as the current market landscape and consumer trends, which are fundamentally different from what we experienced a year ago. Here are a few key learnings. Chipotle's brand and value proposition built on high quality, delicious culinary, and best-in-class operational throughput remains strong and relevant across all age groups and income cohorts. We are seeing positive momentum in the business, with room to accelerate our growth and sharpen our competitiveness without compromising on the core values that define our brand. Our path for further success lies in leaning into what differentiates our brand, accelerating innovation into new offerings and occasions that are of growing importance to our guests, and optimizing the in-restaurant and digital experience. And the strength of our business model and balance sheet allows us to execute against our long-term strategy and emerge from this consumer cycle in a position of greater strength. These insights have shaped the next evolution of our five key strategies, which we are calling our recipe for growth. These strategies include protect and strengthen the core by driving operational and culinary excellence to deliver exceptional value for our guests, evolve the brand messaging and accelerate menu innovation and new occasions that drives demand in our restaurants, Modernize our business model with industry-leading technology, including leveraging AI and relaunching our rewards program to elevate the experience for our guests and our teams. Expand our global reach by scaling with intention through proven company-owned and partner-operated markets, as well as strategic new regions, and cultivate the best talent in the industry that is energized and focused on speed and agility. We are acting on these strategies now and are already seeing results. First, we enter 2026 with a strong foundation. We aim to solidify that through a relentless focus on operational and culinary excellence across all our channels. This will be critical as we continue to scale our brand and meet the need or demand for the future. Driving this key strategy is the acceleration of our rollout of our high efficiency equipment package. which will improve speed and consistency in our restaurants, delivering a better experience for our teams and our guests. As a reminder, this equipment improves prep by two to three hours, which helps eliminate prep time during peak periods and results in stronger and more consistent throughput execution. It also diminishes the learning curve for new team members in more challenging areas like the grill and improves the consistency of culinary with juicier steak and chicken and it's cooked to perfection every time to meet our guests' expectations. For now, we are reinvesting the two to three hours of efficiency back into our restaurants to deliver greater hospitality. The results in the restaurants with the new equipment are compelling. In addition to higher taste of food and overall guest satisfaction scores, we are beginning to see better throughput and meaningful improvement in comp sales. A reminder, 350 restaurants have the full equipment package today, and we anticipate about 2,000 by year end. Second is our brand positioning and menu innovation. Beyond our food, Chipotle excels at brand marketing. We have strong insights into what our guests want and powerful brand building and demand generating programs that have helped to establish our company as an industry leader. As we move into 2026, The consumer landscape is shifting with a heightened focus on value, as well as high-quality protein, fiber, and clean ingredients, all of which are fundamental to Chipotle's North Star brand positioning. There remains significant opportunity to expand our leadership in this fast-growing segment by sharpening our positioning, increasing spend, and refreshing our campaigns to strengthen our value perception and further engage our guests through new occasions and increased menu innovation. A perfect example of this is the recent rollout of our high protein line, which highlights our extraordinary value across a range of price points. Starting with a single taco with 15 grams of protein at just $3.50, to a double protein bowl with over 80 grams of high quality protein. Also includes a new high protein cup for around $3.80 that is inspired by hacks that our guests rely on to boost their intake and offers a solution to those looking for smaller portions. which is a fast-growing trend with the adoption of GLP-1s. Early results are strong, with incidents of extra protein increasing 35% and our recent double protein promotion achieving a record digital sales day. When I said that we will harness what is great about Chipotle and reinforce our value proposition to propel us forward, this is it in action. We also know from our data that our core guest is more likely to choose a restaurant that has a new menu item. To further drive demand, we will increase our menu innovation cadence to four limited time offers in 2026, giving our guests more reasons to visit Chipotle. This will include the return of chicken al pastor next week, which is the most celebrated limited time offer in history, with two times the requests on social media to bring it back compared to any other LTL. Limited time offers are not just delicious. They yield traffic by bringing in new guests while increasing the frequency of the existing base. Additionally, the LTO-acquired guests demonstrate higher long-term value, maintaining elevated spend and frequency levels throughout the year. In addition to limited time offers, we will roll out new sauces and build a strong pipeline of innovation in untapped sales layers like sides and beverages. As new menu items make their way through the StageGate process, we can pace and sequence these growth layers to provide a long path for transaction growth for years to come. We also see the group occasion as a big opportunity longer term. We are currently building awareness around build your own Chipotle for families or groups of four to six, as well as testing the expansion of catering. Today, these two group occasions represent less than 3% of combined sales yet could be double-digit percentage of sales longer term. Build Your Own Chipotle continues to perform. It is also highly incremental and driving strong repeat purchases, which is why we are extending our trial promotion into 2026. To build on our momentum, we will scale awareness across our marketing channels, leaning into moments that bring people together like sports, holidays, and other shared occasions where we have seen our highest incidents. Regarding our catering tests, our teams are getting up to speed with the new equipment and technology that will support a bigger catering business. And we are ramping up our marketing efforts, including the recent rollout of one of the large third party delivery platforms. While it is still early in a testing phase, we are seeing the catering orders begin to build and we remain optimistic that we have found the right solution to help scale our catering business moving forward. Third, We are in process of relaunching our rewards program this spring to widen the funnel and leverage our data and AI to power more personalized and impactful user experiences. 2025, we grew our active members to over 21 million, thanks in part to our Summer of Extras campaign, as well as more engagement through programs like FreePoltLay throughout the second half of the year. Through that, We experienced an acceleration in loyalty comps in the back half of the year that outpaced total comps by several hundred basis points. Currently, about 30% of sales are realized through our rewards platform, and the momentum gives us confidence that there remains significant runway for growth by bringing more guests into the funnel, deepening engagement, and driving sales throughout the year. One of the biggest opportunities is in-restaurant as only about 20% of transactions are through our rewards program compared to nearly 90% of our app transactions. Looking ahead, we have a strong campaign planned around the spring launch of a more engaging rewards program specifically designed to target the in-restaurant guest and remove friction from the checkout experience. Additionally, the campaign will include more programs like Summer of Extras, and continuing to leverage gamification, which has resonated well with our guests. We look forward to sharing more details about rewards in the coming months. Fourth, accelerating global expansion. In 2025, we opened a record 345 new restaurants and saw over 9% new restaurant growth. We opened 334 company-owned restaurants where we surpassed 4,000 in December. This included 21 openings in Canada, an increase of 38% year-over-year for that country. We remain confident in our ability to reach 7,000 restaurants in North America longer term. And we are accelerating growth globally. In Europe, we ended the year with positive comps and another step change in the economic model. In fact, central London and Frankfurt have reached strong cash-on-cash returns, which has unlocked growth for these markets in 2026. Now turning to the Middle East with our regional partner, Al Shaya Group. We opened seven more partner operated restaurants in the fourth quarter and 11 for the year with a total of 14 restaurants in the region. I recently had the opportunity to experience an opening in Dubai where the energy was electric and thousands of guests chanting Chipotle as we unveiled the new restaurant, powerfully demonstrating the brand's affinity and enthusiasm for our delicious food. With Al Shaya Group, we plan to nearly double our footprint and sales in 2026, including entering new markets like Saudi Arabia. Longer term, we believe we can have hundreds of restaurants in this region. Additionally, we remain on track to open our first restaurants in three new partner-operated markets this year, including Mexico, Singapore, and South Korea. The global growth story is gaining momentum across all markets. And we know that when we deliver our fresh, delicious culinary experience with speed and exceptional hospitality, it resonates around the world. Fifth is the team. None of these strategies would be executable or goals attainable without our people. We know that when we take care of our team members, they take care of our guests. It's that simple. I'm extremely proud of the way in which our teams work this year, both in restaurants and at our support centers to deliver for our guests. The key to our culture that sets us apart from the others is promoting top talent from within. In fact, in 2025, Chipotle had 23,000 internal promotions, including 100% of our regional vice president roles, over 83% of our field leader positions, and nearly 90% of our restaurant management. We will always keep opening doors for our people, creating more pathways for career growth and advancement at every level in our company. We move forward, we are building a culture of speed and agility and adding exceptional talent to drive our strategy. As you may have seen, last month we announced that Roger Theodoridis and Chris Brandt transitioned out of their current roles. I want to thank Roger and Chris for their leadership and many contributions. Roger has been a trusted advisor while Chris has been instrumental in helping Chipotle become a purpose-driven lifestyle brand as we grew our footprint to more than 4,000 restaurants. We have promoted Eileen Eskenazi to be our Chief Legal and Human Resources Officer. She will bring her extensive experience overseeing a broad range of legal and compliance matters, as well as talent management and compensation and benefits to help us execute our talent strategy. As I mentioned earlier, our marketing team and how we engage with our guests are at the heart of Chipotle's success. We have grown our marketing capabilities by leaps and bounds over the past eight years, which makes this the exact right moment to take it to the next level and build upon our strong foundation. We are conducting a national search for our next chief marketing officer, and I look forward to sharing more on that front soon. Additionally, to accelerate our approach to technology and innovation, we are hiring a new chief digital officer and a vice president of emerging technologies. Each will play a critical role in helping us to become more efficient enhance our operations, and develop and deploy industry-leading technology. Combination of our existing team, internal succession planning, and external response to searches gives us a high degree of confidence that we will have exceptional talent executing the recipe for growth strategy. And our leadership teams are committed to staying close to our guests and the frontline experience because the fact is the answers are in the restaurants. To close, I want to highlight that we recently celebrated the 20th anniversary of Chipotle's IPO in 2006. Looking back over the last 20 years, what stands out to me is the consistency of our brand. Two decades later, we still have the same unwavering, transparent commitments to sourcing the best ingredients. We continue to deliver exceptional value for our guests, and we are investing in the development and growth of our world-class teams. We look forward to the next 20 years I've never been more confident in the strength of this brand and our ability to win. Our recipe for growth and 2026 plan will position us for success in any environment, and we're confident it will drive transactions, allow us to move faster, and create long-term sustainable growth for our people, our guests, and our shareholders. I will now turn it over to Adam.