CHIPOTLE MEXICAN GRILL INC

(dollar and share amounts in thousands, unless otherwise specified)

1. Basis of Presentation and Update to Accounting Policies

In this quarterly report on Form 10-Q, Chipotle Mexican Grill, Inc., a Delaware corporation, together with its subsidiaries, is collectively referred to as “Chipotle,” “we,” “us,” or “our.”

We develop and operate restaurants that serve a relevant menu of burritos, burrito bowls, quesadillas, tacos, and salads, made using fresh, high-quality ingredients. As of June 30, 2025, we operated 3,839 restaurants including 3,750 Chipotle restaurants within the United States and 89 international Chipotle restaurants. Additionally, we hadfive international licensed restaurants. We manage our U.S. operations based on 11 regions and aggregate our operations toone reportable segment. Additional details on the nature of our business and our reportable operating segment are included in Note 14. "Segment Reporting".

We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair presentation of our financial position and results of operations. Interim results of operations are not necessarily indicative of the results that may be achieved for the full year. The financial statements and related notes do not include all information and footnotes required by U.S. generally accepted accounting principles for annual reports. This quarterly report should be read in conjunction with the consolidated financial statements, footnotes and management’s discussion and analysis included in our Annual Report on Form 10-K for the year ended December 31, 2024.

2. Recently Issued Accounting Standards

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The ASU includes amendments requiring enhanced income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The guidance is effective for fiscal years beginning after December 15, 2024, and should be applied either prospectively or retrospectively. While we are still evaluating the impact of adopting the new ASU, we anticipate this guidance will result in a significant expansion of our annual income tax disclosures.

In November 2024, the FASB issued ASU No. 2024-03, "Disaggregation of Income Statement Expenses (Subtopic 220-40)." The ASU requires public entities to disaggregate, in a tabular presentation, certain income statement expenses into different categories, such as purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The guidance is effective for fiscal years beginning after December 15, 2026, with early adoption permitted, and may be applied retrospectively. We are currently evaluating the impact of adopting the new ASU on our disclosures.

Wereviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the condensed consolidated financial statements.

3. Revenue Recognition

Gift Cards

The gift card liability included in unearned revenue on the condensed consolidated balance sheets was as follows:

Revenue recognized from the redemption of gift cards that was included in unearned revenue at the beginning of the year was as follows:

Chipotle Rewards

Changes in our Chipotle Rewards liability included in unearned revenue on the condensed consolidated balance sheets were as follows:

4. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The carrying value of our cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value because of their short-term nature.

The following tables show our cash, cash equivalents, and debt investments by significant investment category:

(1)The fair value of the corporate debt security is measured using Level 3 (unobservable) inputs. We determined the fair value for the corporate debt security using an internally-developed valuation model and unobservable inputs include credit and liquidity spreads and effective maturity.

(2)We have elected to measure our investment in convertible notes receivable of private companies at fair value under the fair value option. The fair value of the notes receivable are measured using Level 3 (unobservable) inputs. We determined the fair value for the notes receivable using an internally-developed valuation model and unobservable inputs include estimates of the equity value of the underlying business and the timing and probability of future financing events.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Assets recognized or disclosed at fair value on the condensed consolidated financial statements on a nonrecurring basis include items such as leasehold improvements, property and equipment, certain long-term investments, operating lease assets, other assets, and goodwill. These assets are measured at fair value whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable or if there has been an observable price change of a non-marketable equity security.

For the six months ended June 30, 2025 and 2024, nonrecurring fair value measurements resulting in asset impairments were not material.

5. Equity Investments

The following table summarizes our equity investments:

Equity Method Investments

As of June 30, 2025 and December 31, 2024, we owned 6,487 shares of common stock of Tractor Beverages, Inc. (“Tractor”). As of June 30, 2025, our investment represents ownership of approximately 13.5% of Tractor, and we have invested total cash consideration of $14,872. As we are a significant customer of Tractor and maintain board representation, we are accounting for our investment under the equity method. As of June 30, 2025, there wereno impairment charges associated with this equity method investment. The investment in common stock is included within other assets on the condensed consolidated balance sheets with a carrying value of $16,708 and $18,097 as of June 30, 2025 and December 31, 2024, respectively. Refer to Note 13, "Related Party Transactions" for related party disclosures.

Other Investments

As of June 30, 2025, we held 5,819 shares of the Series B Preferred Stock of Hyphen. Hyphen is a privately held company, and as such, the preferred shares comprising our investment are illiquid and fair value is not readily determinable. As of June 30, 2025, we have recognized a cumulative gain of $6,782 related to our investment in Hyphen. The investment is included within long-term investments on the condensed consolidated balance sheet with a carrying value of $31,782 as of June 30, 2025 and December 31, 2024, respectively.

As of June 30, 2025, we owned 766 shares of the Series C Preferred Stock of Nuro, Inc. (“Nuro”). Our investment represents a minority interest and we have determined that we do not have significant influence over Nuro. Nuro is a privately held company, and as such, the preferred shares comprising our investment are illiquid and fair value is not readily determinable. In April 2025, Nuro announced a Series E financing round. With respect to our Series C Preferred Stock of Nuro, we concluded that the April 2025 transaction represented an observable price change in an orderly transaction for a similar investment of the same issuer. As a result, we recognized a loss of $6,168 for the three months ended June 30, 2025. As of June 30, 2025, we have recognized a cumulative net loss of $200 related to our investment in Nuro due to observable transactions. The investment is included within long-term investments on the condensed consolidated balance sheets with a carrying value of $9,800 and $15,968 as of June 30, 2025 and December 31, 2024, respectively.

As of June 30, 2025, we held additional investments in other entities through the Cultivate Next Fund. These additional investments are included within long-term investments on the condensed consolidated balance sheets with a carrying value of $28,892 and $21,252 as of June 30, 2025 and December 31, 2024, respectively.

6. Shareholders’ Equity

We have had a stock repurchase program in place since 2008. During the three and six months ended June 30, 2025, we repurchased $435,894 and $989,580 of stock at an average price per share of $50.16, and $52.32, respectively. As of June 30, 2025, we had $838,761 authorized for repurchasing shares of our common stock, which includes $400,000 in additional authorizations approved by our Board of Directors on June 10, 2025. All shares of common stock that we repurchase are immediately retired and not held as treasury stock.

During the six months ended June 30, 2025 and 2024, shares of common stock at a total cost of $33,319 and $73,011, respectively, were netted and surrendered as payment for minimum statutory withholding obligations in connection with the vesting of outstanding stock awards. Shares surrendered by the participants in accordance with the applicable award agreements and plan are deemed repurchased by us but are not part of publicly announced share repurchase programs.

7. Stock-Based Compensation

Pursuant to the 2022 Stock Incentive Plan, we grant stock options, stock-only stock appreciation rights ("SOSARs"), restricted stock units ("RSUs"), and performance stock units ("PSUs") to employees and non-employee directors. SOSARs and RSUs generally vest intwo equal installments on the second and third anniversary of the grant date. PSUs are subject to service, market and performance vesting conditions, and the quantity of shares that vest will range from 0% to 300% of the targeted number of shares.

In response to the departure of our former CEO in 2024, we granted retention RSUs to key executives. These awards have various vesting terms, and will vest overone, two orthree years. During the six months ended June 30, 2025, total expense recognized for the retention RSUs was $24,090. The impact of these employee retention awards are reflected in the tables below.

Total stock-based compensation expense was as follows:

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SOSARs

A summary of SOSAR award activity was as follows (in thousands, except per share data):

RSUs

A summary of RSU award activity was as follows (in thousands, except per share data):

PSUs

A summary of PSU award activity was as follows (in thousands, except per share data):

*The vested and expected to vest total above represents outstanding base PSUs, adjusted for expected payout amounts in line with current and future estimated performance levels.

8. Income Taxes

The effective income tax rate for the three months ended June 30, 2025, was 24.5%, a decrease from an effective income tax rate of 25.0% for the three months ended June 30, 2024. The decrease was primarily driven by lower non-deductible expenses, partially offset by a reduction in tax benefits related to option exercises and equity vesting.

The effective income tax rate for the six months ended June 30, 2025, was 23.7%, consistent with an effective income tax rate of 23.7% for the six months ended June 30, 2024. A reduction in tax benefits related to option exercises and equity vesting was offset primarily by a decrease in non-deductible expenses.

9. Leases

Supplemental disclosures of cash flow information related to leases were as follows:

10. Earnings Per Share

The following table sets forth the computations of basic and diluted earnings per share (in thousands, except per share data):

The following stock awards were excluded from the calculation of diluted earnings per share:

11. Commitments and Contingencies

Purchase Obligations

We enter into various purchase obligations in the ordinary course of business, generally of a short-term nature. Those that are binding primarily relate to commitments for food purchases and supplies, capital projects, corporate assets, information technology, marketing initiatives and corporate sponsorships, and other miscellaneous items.

Litigation

We are involved in various claims and legal actions, such as wage and hour, wrongful termination and other employment-related claims, slip and fall and other personal injury claims, advertising and consumer claims, privacy claims, and lease, construction and other commercial disputes, that arise in the ordinary course of business, some of which may be covered by insurance. The outcomes of these actions are not predictable, but we do not believe that the ultimate resolution of any pending or threatened actions of these types will have a material adverse effect on our financial position, results of operations, liquidity, or capital resources. However, if there is a significant increase in the number of these claims, or if we incur greater liabilities than we currently anticipate under one or more claims, it could materially and adversely affect our business, financial condition, results of operations and cash flows.

Shareholder Actions

As reported in previous SEC filings, Chipotle and several of its executive officers are defendants in Michael Stradford v. Chipotle et. al., a purported shareholder class action in the U.S. District Court for the Central District of California, alleging that statements and omissions by Chipotle regarding portion sizes were materially false and misleading, resulting in the market price of Chipotle’s stock being artificially inflated during the claimed class period. On April 29, 2025, the lead plaintiff in the case, Lisa Tai, filed an amended complaint, pleading largely the same facts and alleged violations of law as the original Stradford complaint, adding additional factual allegations as well as allegations regarding purportedly improper insider trading by the individual defendants in the case. The case seeks damages on behalf of the purported class in an unspecified amount, interest, an award of reasonable costs and attorneys’ fees, and other relief as determined to be appropriate by the court.

Also as reported in previous SEC filings, two shareholder derivative actions were filed in the U.S. District Court for the Central District of California alleging that members of Chipotle’s Board of Directors and one of its executive officers breached their fiduciary duties by making or allowing Chipotle to make the allegedly false and misleading statements that are the subject of the Stradford matter described above. The complaint further alleges that the defendants breached their fiduciary duties by causing Chipotle to repurchase stock at inflated prices and by engaging in improper insider sales of Chipotle stock. The shareholder derivative actions have been consolidated into a single lawsuit captioned In re Chipotle Mexican Grill, Inc. Stockholder Derivative Litigation, and seeks damages in an unspecified amount as well as interest, an award of reasonable costs and attorneys’ fees, and other relief as determined to be appropriate by the court. The consolidated derivative action has been stayed pending a decision on the motion to dismiss that Chipotle filed in the Stradford action, which is in the briefing stage.

Chipotle intends to continue to defend these cases vigorously, but it is not possible at this time to reasonably estimate the outcome of or any potential liability from these cases.

Accrual for Estimated Liability

In relation to various legal matters, we had an accrued legal liability balance of $16,316 and $19,465 included within accrued liabilities on the condensed consolidated balance sheets as of June 30, 2025 and December 31, 2024, respectively.

12. Debt

On June 24, 2025, we terminated a $500,000 revolving credit facility with JPMorgan Chase Bank as administrative agent, which we did not borrow on over the period of which it was active, and entered into a new $500,000 revolving credit facility with JPMorgan Chase Bank as administrative agent. Borrowings on the credit facility bear interest at a rate equal to the Secured Overnight Financing Rate (“SOFR”) plus 1.125%, which is subject to increase based on changes in our total leverage ratio as defined in the credit agreement. We are also obligated to pay a commitment fee of 0.115% per year for unused amounts under the credit facility, which also may increase based on changes in our total leverage ratio. We are subject to certain covenants defined in the credit agreement, which include maintaining a total leverage ratio of less than 3.0 x, maintaining a minimum consolidated fixed charge coverage ratio of 1.5 x, and limiting us from incurring additional indebtedness in certain circumstances. We hadno outstanding borrowings under the new or former credit facility and were in compliance with all covenants as of June 30, 2025 and December 31, 2024, respectively.

13. Related Party Transactions

As of June 30, 2025, we owned approximately 13.5% of the common stock outstanding of Tractor. As we are a significant customer of Tractor and maintain board representation, we are accounting for our investment under the equity method. Accordingly, we have identified Tractor as a related party. We purchase product from the supplier for sale to guests in our restaurants. During the three months ended June 30, 2025 and 2024, purchases from the supplier were $13,568 and $13,412, respectively. During the six months ended June 30, 2025 and 2024, purchases from the supplier were $24,982 and $24,966, respectively.

We are an investor in Vebu Inc. (“Vebu”), a developer of restaurant automation technology. As we are a significant customer of Vebu and maintain board representation, we have determined that Vebu is a related party. Our investment, which is comprised of preferred shares, is accounted for as a non-marketable equity investment and is included within long-term investments on the condensed consolidated balance sheets. During the three months ended June 30, 2025 and 2024, purchases from Vebu were $1,175 and $0, respectively. During the six months ended June 30, 2025 and 2024, purchases from Vebu were $2,909 and $0, respectively.

14. Segment Reporting

We have a single reportable segment, the U.S. segment, that is comprised of our operations in the United States. Segment information is prepared and managed on the same basis as described in our Annual Report on Form 10-K for the year ended December 31, 2024. Our CEO, who is our Chief Operating Decision Maker ("CODM"), does not evaluate asset information by reportable segment as asset information is provided to the CODM on a consolidated basis. Therefore, we do not disclose total assets by our reportable segment.

The following table presents selected financial information with respect to our single reportable segment:

(1)Other segment items consist of pre-opening costs, impairment, closure costs, and asset disposals related to the U.S. segment.

(2)Corporate and other unallocated expenses represent corporate overhead expenses that have not been allocated to any segment for reporting purposes including general and administrative expenses.

(3)Amounts reflect the net income from operations related to our operations in Canada, Europe and international licensed restaurants.

15. Subsequent Event

On July 4, 2025, H.R.1, commonly referred to as the One Big Beautiful Bill Act, was enacted in the U.S., which includes a broad range of tax reform provisions, including extending and modifying certain key Tax Cuts and Jobs Act provisions (both domestic and international), and provisions allowing accelerated tax deductions for qualified property and research expenditures. The legislation has multiple effective dates, with certain provisions effective in 2025 and others to be implemented through 2027. While we are evaluating the full effects of the legislation on our estimated annual effective tax rate and cash tax position, we expect that the legislation will likely not have a material impact on our financial statements. As the legislation was signed into law after June 30, 2025, it had no impact on our operating results for the three months and six months ended June 30, 2025.