This summary is based on the second quarter fiscal 2008 earnings call conducted by Chipotle Mexican Grill, Inc. (CMG) on July 23, 2008.
Management:
Investor Relations: Chris Arnold
Founder, Chairman & CEO: Steve Ells
President & COO: Monty Moran
CFO: Jack Hartung
Key Investors Issues
- EPS were 74 cents per share compared to 60 cents per share last year.
- Net income was $24.5 million compared to $20 million in the second quarter of 2007.
- Revenue increased 24.2% to $340.8 million from $274.3 million in the second quarter of 2007.
Second Quarter Highlights
Revenue increased 24.2% to $340.8 million from $274.3 million in the second quarter of 2007.
- Growth in revenue was attributable to new restaurants not in the comparable base and a 7.1% increase in comparable restaurant sales in the second quarter.
- Comparable restaurant sales growth was primarily due to menu price increases and an increase in customer visits.
- Chipotle opened 49 restaurants.
- Restaurant level operating margins decreased to 22.4% from 23.2% in the second quarter of 2007, primarily due to an increase in food costs and higher advertising costs, partially offset by menu price increases associated with the addition of naturally raised meats and lower promotion costs.
- General and administrative expenses were $20.7 million, or 6.1% of revenue, compared to $18.1 million in the second quarter of 2007, or 6.6% of revenue.
- General and administrative expenses declined as a percentage of revenue due to the reversal of a portion of our performance based bonus accrual from the first quarter and the effect of economies of scale from higher restaurant sales. The second quarter general and administrative expenses of 2007 also benefited from the removal of the remaining $1.2 million reserve, or 2 cents per share, associated with credit card transactions.
- Income from operations increased to $38.3 million, compared to $30.7 million in the second quarter of 2007.
- Net income was $24.5 million, or 74 cents per share, compared to $20 million, or 60 cents per share in the second quarter of 2007.
Year-to-Date Financial Highlights
- Revenue increased 26.6% to $646.1 million from $510.4 million in the prior year period. This growth in revenue was attributable to new restaurants not in the comparable base and an 8.5% increase in comparable restaurant sales. Comparable restaurant sales growth was primarily due to an increase in customer visits and menu price increases. Chipotle opened 77 restaurants during the period.
- Restaurant level operating margins decreased to 21.9% in the period, versus 22.1% in the six months ended June 30, 2007, primarily due to an increase in food costs and higher credit card processing fees associated with increased credit card usage, partially offset by menu price increases associated with the addition of naturally raised meats.
- General and administrative expenses were $42.2 million or 6.5% of revenues, compared to $35.1million, or 6.9% of revenues for the prior year period. General and administrative expenses declined as a percentage of revenue primarily due to the effect of economies of scale from higher restaurant sales and lower performance based bonus accruals for 2008. General and administrative expenses for the first half of 2007 also benefited from the removal of the remaining $1.2 million reserve, or 2 cents per share, associated with credit card transactions.
- Income from operations increased to $65.1 million compared to $49.3 million a year ago.
- Net income was $41.8 million, or $1.25 per share, compared to $32.4 million, or 98 cents per share in the prior year period.
Fiscal 2008 Outlook
- The company expects comparable restaurant sales increases in the mid single digits.
- The company expects 130 - 140 new restaurant openings.
- The company expects non-cash stock compensation expense of approximately $12.5 to $13.0 million.
- The company expects an effective tax rate of approximately 38%.
- The company expects weighted average common shares outstanding of approximately 33.4 million.
Key questions from the second quarter earnings call conducted by Chipotle Mexican Grill, Inc. on July 23, 2008.
Nicole Miller (Piper Jaffray):
What was the price in the quarter in the comp?
Jack Hartung: Up 4%.
