This summary is based on the first quarter fiscal 2008 earnings call conducted by Chipotle Mexican Grill Inc. (CMG: chart) on April 23, 2008.

Management:

- Investor Relations: Chris Arnold
- Founder, Chairman & CEO: Steve Ells
- President & COO: Monty Moran
- CFO: Jack Hartung

Key Investors Issues

- Revenues were up 29% to $305 million from $236 million in the prior year.
- Net income grew 39% to $17.3 million or 52 cents per diluted share, from $12.4 million or 38 cents per diluted share in the prior year on revenue growth.
- The company opened 28 new restaurants.

First Quarter Highlights

Revenue increased by 29.3% from $236.1 million last year to $305.3 million, driven by new restaurants along with a 10.2% increase in comparable restaurant sales.

- Margins expanded 50 basis points even though the firm lost 80 basis points in food costs due to increasing commodities.
- The efficiencies created from having a focused menu and the economies of scale achieved from higher restaurant sales allow the firm to invest in a premium ingredient which results in better tasting and more wholesome food.
- The increase in restaurant comps came mostly from an increase in customer visits with about 3.5% of the comp coming from menu pricing mostly associated with the rollout of naturally raised meats.

Food, beverage and packaging costs were 32.4%, up from 31.6% in 2007, due primarily to the higher cost of cheese, avocados, chicken and steak.

- Food costs were 50 basis points higher than the prior quarter as a result of higher cheese and tortilla and the tortilla costs are higher due to rising wheat costs.
- The firm continues to see significantly higher food costs for most of the raw ingredients going forward, though it recently locked in costs for cheese and tortillas for the year.
- Labor costs were 26.7% of revenue, slightly down from 27.7% last year, due to higher average sales, the national labor matrix, along with some benefit coming from the lower insurance associated with the switch to self-insurance.
- G&A was $21.6 million or 7.1% of revenue compared with $17 million or 7.2% of revenue in 2007 due to the effect of the economies of scale from higher restaurant sales.

Income from operations increased a very healthy 44% to $26.8 million compared to $18.6 million in 2007, while interest income was $1.3 million, down $147,000 or about 10% from last year due to lower interest rates.

- The decline in interest income would have been much greater as the effective taxable equivalent yield on short-term investments declined from 5.5% to 3.8% which is a drop of over 30%.
- However the firm shifted its investment mix from mostly tax exempt securities last year to mostly taxable securities this year as the interest rate benefit net of tax of the tax exempt securities disappeared and made it economical to invest in the taxable securities.
- Net income grew 39% to $17.3 million or 52 cents per diluted share, from $12.4 million or 38 cents per diluted share in the prior year on revenue growth.

The company opened 28 new restaurants during the quarter, bringing the total number of restaurant to 730 at March 31, 2008 and continues to expect to open between 130 and 140 new restaurants this year.

- New openings in new markets have not declined but the firm has been having openings in many new markets over the past few years and so the mix of openings is shifting slightly away from existing markets and towards these new markets.
- Though the industry faces significant challenges in the near term, over the long-term the firm remains confident that it can grow diluted EPS at an average annual rate of at 25%.

Operational Insights:

- Chipotle’s Food With Integrity program entails looking at every ingredient used and how the firm can make it better from more sustainable sources.
- This commitment is helping bring customers a new kind of dining experience, that let’s everyone have access to great tasting food made with the kinds of ingredients that were once only available in high end restaurants or specialty food stores.
- The firm added naturally raised beef to all of the restaurants in Minnesota, and is making progress with the naturally raised chicken suppliers with about 85% of restaurants serving naturally raised chicken.
- In the coming months, the firm expects to introduce naturally raised chicken to the remaining restaurants and complete the goal of serving 100% naturally raised chicken in addition to serving 100% naturally raised pork today.

The firm is working with the chief supplier and the farmers that provide milk for the cheese to increase their percentage of the milk that comes from pasture raised cattle.

- Later this year, the firm plans to open its first lead certified restaurant which provides a set of standards for environmentally sustainable construction.
- In Toronto, the plan in opening the restaurant is to get into the market, introduce the brand and to establish a supply chain.
- The firm also believes that it is important to build a strong local team to run the restaurants in Toronto so rather than pushing those processes and compromising the brand and culture, it will take a measured approach that will set it up for long-term success in Canada.

The company has just began to test handheld POS devices in 50 of the highest volume restaurants and will be watching closely to see what kind of impact this can have once crews have been trained to use them.

- In some of the busiest lunch restaurants, the firm has seen that it is able to increase throughput with this new POS.
- The handheld allow the firm to create a better customer experience by allowing it to communicate with customers while they are in line.