Chipotle Mexican Grill, Inc.

Good day and welcome to the Chipotle Mexican Grill second quarter 2026 results conference call. All participants will be in a 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 Michael Johnston, Vice President of Finance. Please go ahead.

Hello, everyone, and welcome to our second quarter fiscal 2026 earnings call. By now, you should have access to our earnings press release. If not, it can 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 today by reminding you that today's discussion includes forward-looking statements, including projections about our future business, financial, and other performance results. 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 today's earnings release and 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. We will start today's call with prepared remarks from Scott Boatwright, Chief Executive Officer, and Adam Rymer, 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.

Thank you, Michael, and good afternoon, everyone. We're pleased with the strength of our second quarter results, which were driven by continued positive transaction growth and clear evidence that our recipe for growth initiatives launched at the start of the year continue to gain traction. These proof points reinforce our confidence as we strengthen restaurant execution, accelerate innovation, and invest in the long-term health of the business. For the second quarter, we delivered revenue growth of 9.3% to $3.3 billion, including positive comparable sales and transactions. Our results reflect the team's disciplined execution of our recipe for growth strategy. Over the last several months, we have seen the successful return of Chipotle honey chicken, continued strength from our cilantro lime sauce, our revamped rewards program, and marketing initiatives that help keep Chipotle top of mind, including several culturally relevant activations. Together, these initiatives drove incremental transactions while reinforcing the strength and relevance of the Chipotle brand. At the same time, We continue to make targeted investments to strengthen the guest experience and improve hospitality. Our recipe for growth strategy is creating multiple levers to try transactions, improve execution, and reinforce the competitive advantages that differentiate Chipotle. As a reminder, the five pillars of our strategy include protecting and strengthening the core by driving operational and culinary excellence to deliver exceptional value for our guests, Modernizing 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. Evolving brand messaging and accelerating menu innovation in new occasions that drive demand. Cultivating the best talent in the industry, energized and focused on speed and agility, and expanding our global reach by scaling with intention through proven company-owned and partner-operated markets as well as strategic new regions. The first pillar of our recipe for growth strategy is to protect and strengthen the core, and that starts with running great restaurants. For our guests, that means delicious food, generous portions, exceptional throughput, and exceptional hospitality. That is what we are focused on every day, and it's why we're making targeted investments to strengthen the execution across our restaurants. Throughput is the cornerstone of great hospitality. And across the first half of 2026, we have seen steady progress across all four pillars of execution. The two most important pillars to building throughput are Linebacker and Expo. And in addition to strong Expo deployment, we also drove Linebacker deployment in over 70% of our restaurants for the first time this quarter. The team's focus on delivering the basics through throughput drove year-over-year MAX 15 performance to accelerate for the second quarter in a row. In addition to our weekly throughput reviews and consistently high staffing levels, our investments in the back of the house over the last two years have been a key enabler of this progress. This includes last year's introduction of produce slices and the ongoing rollout of HEAP, our High Efficiency Equipment Package. Keep is designed to make food preparation more delicious, more efficient, and more consistent. Because we're reinvesting the labor efficiency back into our restaurants, our crews can spend more time with our guests, strengthening hospitality, and delighting them by being properly deployed during their busiest periods. The equipment is now installed in more than 1,000 restaurants, and we still expect to reach approximately 2,000 restaurants by year end. We're excited by the results we've seen so far, including improvements in food quality, guest satisfaction, and throughput gains are perhaps the most notable, where we see HEAP restaurants outperforming the enterprise by two to three entrees in their peak 15-minute period. These tangible gains are translating into hundreds of basis points of improvement and comparable sales. Beyond HEAP, We're also reinforcing our commitment to exceptional hospitality through enhanced training and greater accountability. While food quality and generous portions bring guests through our doors, it's the experience we deliver that keeps them coming back. To help ensure we're consistently meeting our standards, we're bringing back mystery shoppers to provide more frequent feedback to our teams. These insights will help us identify opportunities for improvement and raise the bar across the enterprise. Additionally, Our restaurant leaders held a hospitality huddle with their crews in June to help every team member understand their duty to say yes to the guest and emphasize the role they play in delivering a great experience. To carry this message further, we're also empowering our team leaders to identify more moments to surprise and delight our guests. We're also optimizing how general managers and apprentices are deployed throughout the week. Through enhanced training and a strategic reallocation of manager time to support our busiest day parts, we're seeking to strengthen execution where it matters most. We're starting to see these investments pay off with notable year-over-year increases in overall guest satisfaction scores and digital on-time percentage, alongside a meaningful reduction in refunds. The second pillar is modernizing our business through technology and digital innovations. and I believe we are now even better positioned with the addition of Arlie Sisson, our Chief Digital Officer. She has quickly impacted the culture and direction of her teams and is bringing a new and inspired vision for how we can move faster in implementing technology to better serve our restaurant teams and engage with our guests. We're already starting to see this come to life through the launch of our modernized Cook to Needs tool, live in pilot this month. The tool helps to ensure our teams are ready with the right amount of freshly prepared food at the right time. It also automates a cumbersome daily task by eliminating data entry and automatically incorporating AI-based demand forecasts. Early feedback from our crews has been strong, and the tool's utility will only grow as our AI breadth expands, providing dynamic adjustments, intelligent insights, and actionable coaching. This is complemented by Chipotle Kitchen, Our proprietary crew interface on the digital make line, which is designed to improve digital order accuracy, speed, and consistency. We are currently rolling out this new technology to all restaurants and continue to see encouraging improvements in accuracy, on-time fulfillment, and overall guest satisfaction. Within Chipotle Rewards, we relaunched in mid-April with an enhanced experience designed to increase personalization, deepen guest engagement, and strengthen our digital ecosystem. The relaunch introduced more personalized offers, simplified onboarding, increased proactive re-engagement for lapsed users and expanded redemption options. One of our largest opportunities remains increasing rewards participation in our in-restaurant business, where only about 20% of the transactions scan for rewards compared to nearly 90% of owned digital transactions. To help close the gap, we introduced new in-restaurant enrollment tools, including menu panels, QR codes, and enhanced team member engagement. These have already driven a nearly 20% step up in daily enrollments since launch. Encouragingly, in-store loyalty comps have outpaced order-ahead loyalty comps since the relaunch, reinforcing our belief that simplifying the in-restaurant rewards experience can meaningfully increase engagement over time. We're also preparing to pilot a new frictionless in-restaurant rewards experience beginning in August that will allow our guests to automatically earn rewards points while paying, eliminating the need to also scan the rewards card at checkout. This is an important step to not only creating a more seamless in-restaurant loyalty experience, but another component of our relentless focus on throughput, making payment faster and easier for our most loyal guests. Over time, We believe this will lead to meaningful improvement in both rewards engagement and speed of service. In June, we brought back our Summer of Extras campaign, building on the momentum of our rewards relaunch and new offers designed to reward frequency and deepen engagement. Compared to last year, more members have engaged with Summer of Extras with the highest gains coming from our lowest frequency guests, and we have seen overall frequency increase. With 23 million active members in our rewards program, we continue to see a significant opportunity to strengthen our digital ecosystem by reducing friction, increasing personalization, and creating additional opportunities to drive guest frequency over time. Our next strategic pillar is evolving our brand messaging, accelerating menu innovation, and expanding on new occasions. At the heart of this pillar is ensuring guests understand what makes Chipotle different. Real food made from high-quality ingredients, prepared fresh every day using classic culinary techniques. Combined with generous portions, speed, and an accessible price point, we believe Chipotle continues to offer one of the strongest value propositions in the industry. This was reinforced by our most recent brand tracker, which showed meaningful improvement in guests' perception that they are getting good value at Chipotle. It has been great to welcome Fernando Machado, our Chief Brand Officer, to the team this quarter. In his first two months on the job, I've been impressed with his enthusiasm and urgency he has brought to the organization in evolving our brand messaging. He was already an admirer of the brand, and that has only been reinforced as he has taken time to truly understand Chipotle. His vision is to enhance the way we tell our story, and he's quickly moving the team to implement marketing strategies that highlight The differentiated value of our real food, stretch our creative ambition, and resonate on a cultural level. Later this quarter, you will begin to see the first elements of this ongoing evolution in our brand messaging. On menu innovation, we kicked off the quarter with the return of Chipotle Honey Chicken, one of our most popular limited time offerings that delivers a balance of smoky heat from Chipotle peppers and a touch of sweetness from pure honey. Guest response has been strong, outperforming last year's launch and achieving a cumulative attachment rate north of 25%. Our cilantro lime sauce, which is prepared fresh daily in our restaurants, also continues to perform exceptionally well. It has maintained attachment rates above both red chili cherry and adobo ranch, reinforcing the demand we're seeing for flavor-forward menu innovations. Together, these offerings demonstrate our ability to introduce compelling menu innovation while staying true to the culinary principles that define the Chipotle brand. We also refreshed our high-protein campaign with new athlete and Chipotle superfan orders, reinforcing one of our key points of differentiation, delicious high-quality protein prepared fresh every day. Looking ahead, we have a strong innovation pipeline planned for the second half of the year, including two additional limited time protein options, and continued innovation across the menu. These offerings will give our guests more reasons to choose Chipotle and reinforce exactly what makes our food unique. We're also focused on expanding the group occasions where guests choose Chipotle, particularly through catering and build your own Chipotle, which we are now positioning more clearly as a family meal solution. This helps guests better understand its convenience and value, and the response has been clearly positive with a notable increase in orders since we implemented the change. The results from our catering pilots in Chicago, Boston, and now Phoenix have been very encouraging. The catering guest comes with the highest expectation of flawless execution, and these tests have provided valuable learnings as we prepare to scale our operation and technology across both first- and third-party marketplaces. We are now confident we can grow the business while maintaining the quality, speed, and hospitality that defines a Chipotle experience. Together, catering and build your own Chipotle represent 2% to 3% of sales today, but they are highly incremental and operationally efficient. We are working through the remaining pilot learnings now, positioning ourselves for a national launch in 2027. Finally, Our culturally relevant marketing continued to resonate with guests throughout the quarter. Our Tattered Like a Chipotle Bag promotion earlier this year only briefly held the title as our highest sales date ever, as it was outdone by the Match Day BOGO, which set a new single-day sales record and became the most successful BOGO in our history. These campaigns are an important part of the broader effort to tell the Chipotle story in a more authentic and culture-forward way, while giving guests more reasons to choose us. Now shifting our focus to developing world-class people leaders. At Chipotle, our people are our greatest competitive advantage. And when we invest in our teams, they deliver better experiences for our guests, and that drives sustainable growth. A great example is Hamid Harizi, who joined Chipotle as a crew member 13 years ago. He rode his bicycle to work, had no college degree, and came to work each day determined to learn and improve. Today, Hamed is the team director responsible for developing talent across his market and is nearing completion of his master's degree. His journey reflects what makes Chipotle special, culture that recognizes potential, rewards dedication, and creates pathways for advancement fueled by our growth. His story is one of many that demonstrates the impact Chipotle can have on the lives and careers of our team members. Just as importantly, we see the strength of that culture reflected in our results. General manager turnover remains at a multi-year low, and crew turnover has returned to historical norms. We believe Chipotle has become one of the industry's best developer of restaurant operators, and that capability is critical to delivering consistent execution today while supporting our long-term growth. I'm pleased to provide an update on how we are expanding our global reach through disciplined growth across both company-owned and partner-operated markets. We opened 100 company-owned restaurants during the quarter and still expect to open approximately 350 restaurants this year with about 80% including at Chipotle. We see substantial growth potential in North America and we're applying the same disciplined operating model that has driven our success here as we expand internationally. In Europe, we saw each country deliver high single-digit comp sales growth during the quarter, as our continued alignment to North American culinary operations and training standards translated into stronger restaurant performance. And just two weeks ago, I had the privilege of attending the opening celebration of our first restaurant in Monterrey, Mexico. We believe that real food delivered with excellent culinary will resonate strongly with the Mexican consumer and are entering the market with world-class operational capability and our partner, Alsea. It was a pleasure to see this come to life with incredible energy and enthusiasm for our market entry. We'll build on this momentum with additional openings planned in the Monterey metropolitan area later this year and expansion into Mexico City in 2027. We'll also open our first restaurants in Seoul, South Korea this year, which Singapore expected to follow shortly thereafter in early 2027 with our partner SPC Group. Each of these new markets represents an important step toward our vision of building Chipotle into an iconic global brand. Now turning to our partner operating markets in the Middle East. In late April, we opened a new restaurant in Abu Dhabi, followed by our second location in Qatar last week. Additionally, we plan to enter the Saudi Arabian market in the near future. We're also encouraged to see sales across the region returning to pre-conflict levels. While near-term development remains dependent on geopolitical conditions, our long-term outlook remains unchanged, and we continue to believe that the region has the potential to support hundreds of Chipotle restaurants over time. Consumers around the world are increasingly looking for high-quality food prepared fresh with real ingredients, and we believe Chipotle is well-positioned to meet that demand. To close, We're encouraged by the progress we're making as our recipe for growth strategy has gained traction in the last two quarters. We're strengthening restaurant execution, accelerating innovation, enhancing our digital capabilities, investing in our people, and expanding our global reach. What gives me the most confidence is our team, both here in North America and around the globe. They're energized, aligned, and focused on delivering exceptional food, throughput, hospitality, and value every day. I'm confident we have the right leaders in place, the right strategy, and a significant opportunity ahead as we continue building Chipotle into an iconic global brand. And with that, I'll turn it over to Adam.