Good day and welcome to the Chipotle Mexican Grill, Inc. First Quarter 2016 Earnings Conference Call. All participants are now in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. As a reminder, today's call is being recorded. And I would now like to introduce Investor Relations Manager for Chipotle Mexican Grill, Mr. Mark Alexee. You may begin your conference.

Thanks, Matt. Hello, everyone, and welcome to our call today. By now you should have access to our earnings announcement release this afternoon for the first quarter 2016 and you may also see it on our website at chipotle.com in the Investor Relations section. Before we begin our presentation, I'll remind everyone that parts of our discussion today will include forward-looking statements as defined in securities laws. These forward-looking statements will include statements about our business recovery, planned marketing programs and potential to recover lost sales, projections of the number of restaurants we intend to open, statements about future restaurant margins, projections regarding food, labor, marketing, promotion and G&A costs, and statements about stock repurchases as well as other statements about of our expectations and plans. These statements are based on information available to us today. We are not assuming any obligation to update them. Forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements. We refer you to the risk factors in our annual report on Form 10-K and is updated in our subsequent Form 10-Qs for discussion of these risks. I'd like to remind everyone that we've adopted the self-imposed quiet period, restricting communications with investors during that period. The quiet period begins on the first day of the last month of each fiscal quarter and continues until the next earnings conference call. For the second quarter of 2016, it will begin June 1 and continue through our first quarter earnings release or second quarter earnings release planned for July 21. We will start today's call with some prepared remarks and then we'll take 20 minutes of questions. On the call with us today are Steve Ells, our Chairman and Co-Chief Executive Officer; Monty Moran, Co-Chief Executive…

Thanks, Monty. We invested aggressively during the first quarter to encourage our customers to return to Chipotle. Our customers redeemed over 6 million free burritos or bowls during February and March. And we also gave away nearly 1 million free orders of chips and salsa or chips and guac. The goal is to invite our customers back into Chipotle with a compelling offer, treat them to a delicious meal and an energetic environment with the hope that they will begin to return to their normal frequency of visiting Chipotle. The response to the offers was strong especially right after our all-company meeting on February 8 with redemptions reaching a high of nearly $500,000 in a single day just a few days after the offer began. Comp transactions improved from down 34% for the full month of January to a high point of down only 9% during the third week of February. Of course, it's not surprising that free offers spur immediate action by our customers, but more importantly, as the number of redemptions leveled off, we saw our paying customers steadily increase. And by the first week of March when redemptions were down to under $100,000 per day, our comp transactions were down only 14% and comp sales were down 22%. We felt the recovery was off to a respectable start just three weeks or four weeks into our marketing campaign. As Steve mentioned, we implemented a number of new procedures and protocols to establish Chipotle as an industry leader in food safety. Some of these protocols are put to the test in Boston last month and we had four employees who were at home sick and fully followed our protocols by not coming to work. We temporarily closed the restaurant and local health officials commended us for the successful…

At this time, we'll take a question from John Glass with Morgan Stanley. Please go ahead. John Glass - Morgan Stanley & Co. LLC: Thanks very much. If I could, just two. One is, first, can you just talk about currently what portion of your sales are on coupons? I think you've talked about that in the past with the rate of – how reliant are you currently on coupon redemptions? What portion of sales, and how have those trended over like the last four weeks as you've sort of moved away from some of the initial drops?

Yeah, John, it's dropped off a lot. If you look at the difference between during April between our sales and our transactions which is about a 4% to 5% difference; that would account for the people that are coming in and have a coupon and are not – basically it's reducing our average check. So I would call it in that 4% to 5% range. John Glass - Morgan Stanley & Co. LLC: 4% to 5% of transactions or of your total comp are coming from that?

Well, there's a gap between the comp sales and the comp transactions and that gap is all driven by a lower average check and most of that gap is driven by the promotions. So part of it is driven by a lower check size but the largest part of it is driven by the promotions. So I'd say the promotions are in that kind of the 4% range in terms of sales. Those are sales, John. Had they been coming in and full paying customers, there would be virtually no gap between our transactions and sales. John Glass - Morgan Stanley & Co. LLC: Got you. And I know you gave some scenarios around where store margins would be at various comp levels. Can you talk more specifically about the second quarter specifically? And knowing now a little bit more specifically about the promotional activity you're doing and the expense related to it, do you have a sense of where second quarter earnings comes out based on all of that? I understand there's some comp sensitivity, but is there anything specifically to call out in terms of the cost structure in the second quarter versus the first quarter?

John, I hesitate. The first quarter we gave a figure, we said we were going to lose $1, and that's because we knew we had a lot of one-time things. We were implementing our food safety protocol. We're not prepared – I'm not prepared to guess what the EPS is going to be in the second quarter. It all depends on sales. So if sales recover, the EPS will turn positive very quickly, and we'll have a reasonably healthy EPS. But if they stay at this level, it's going to be hard to deliver the higher margins. It's going to be hard to deliver the EPS. So we're not going to give an EPS projection at this time. John Glass - Morgan Stanley & Co. LLC: Got you. Okay. Thank you.

And we'll go to Sharon Zackfia with William Blair. Sharon M. Zackfia - William Blair & Co. LLC: Hi. Good afternoon. I guess a couple of questions for Mark. I think you mentioned in your prepared commentary that some perception areas with consumers are lagging. And I wonder if you could talk about what the laggers are and how you're going to address those? And then secondarily, when you talk about your most loyal and most frequent customers, can you define how you characterize those? Are those folks who come in once a week? Just any kind of parameters around that. And then it sounds like they have been lagging maybe more than the less frequent customers. If you could give some color around that, that would be helpful. Mark Crumpacker - Chief Creative & Development Officer: Sure. With regard to the brand attributes, they're all actually looking pretty good, but I'll give you a few examples. Aided consideration, so obviously when we give people a list of restaurants including our brand, and ask them how likely they are to visit, before the food safety issues that hovered around 50%, right now that's recovered to 43%. So we're down 7% on that one, but it's picking up at a consistent rate. Admiration before these incidents was 70%, now it's at 61%. So again, recovering from down into the 50% area. So a lot of the stuff has come back up nicely. The way we measure new customers, of course, are the people who visited for the first time within the last three months. That's actually recovered almost – it's just two points below what it was before this, so that's really good news. On the customers who are lapsed, we look at people who haven't been in three months or…

This time, we'll move to Joshua Long with Piper Jaffray. Joshua C. Long - Piper Jaffray & Co. (Broker): Great. Thank you. So I wanted to see if you could provide some commentary on how you're thinking about balancing the aggressive advertising and traffic driving initiatives here over the near-term with maybe balancing the longer-term value or consumer perception over the longer term. Mark Crumpacker - Chief Creative & Development Officer: Well, we are transitioning first from free to buy one, get ones and other types of promotions which typically have a purchase associated with them as a transitional step away from being entirely dependent on free food. So that's part of it. But as I mentioned also in my prepared comments, we're getting back into the type of advertising or marketing that's been so successful for us in the past, which is some of this brand marketing which is based on short films and other types of content which really deliver messages about the brand and continue to differentiate Chipotle from the competition. One of the good – one of the really good pieces of news in our research is that the differentiation of Chipotle from our competitors really has not suffered, or to the extent that it did, it recovered fully. And so we're going to continue to push the messages about our 65 ingredients and how simple they are and our simple, classic cooking techniques and how different that is from the competition whose food is – tends to be heavily processed and include hundreds and hundreds of ingredients, many of which are processed. So we're definitely getting back on that, and July is when we'll really be in full swing with that type of marketing again. So we're transitioning back. But as I say that, there's…

We'll move to John Ivankoe with JPMorgan.

Thank you. Two questions, if I may. Firstly, with some of the food safety changes that you've made, the sous vide of the steak, blanching a variety of vegetables and precutting lettuce, have all of those changes been met with positive customer response? In other words, do the customers like the food as much or better than they did before with the operational changes that you found yourself to make? Montgomery F. Moran - Co-Chief Executive Officer, Secretary & Director: Yeah. I think, generally, the changes have gone very, very well. I won't say all of them have been met with immediate approval. And an example of that is we went over to a lettuce that was pre-shredded at a central kitchen in order to be able to be absolutely certain of the – that all the interventions were in place to make sure that that was food safe. And that lettuce, I think, people found to be a degradation in quality of the stuff that was cut in the restaurants by our teams who – when our restaurant teams do it, they're able to cut it to the exact size they want, they're able to really make sure that the presentation is exactly what they want and that they can assure the quality of the lettuce. This was a product which is really just completely prepared in a central kitchen. So what we've been able to do and what we'll be rolling out soon, we've been able to find a way to have this made completely safe by interventions in a central kitchen but yet still have the entire head of lettuce brought to the restaurant and yet and give our crews in the restaurant the latitude to be able to cut that properly and assure the quality of…

Okay. And, Monty, you made a comment in your prepared remarks and it was interesting how you said it, talking about the unit development in 2016, and basically saying, beyond this year, continued to grow at a healthy pace. And I think you used the word disciplined pace around location, returns and staffing. I'm sorry I don't have the transcript in front of me. But it seems like you may be kind of preparing us for a slowdown or a leveling off of development from 2016 into the outer years. So I just wanted to see perhaps what you meant by those comments. Montgomery F. Moran - Co-Chief Executive Officer, Secretary & Director: Yeah, yeah. Thanks for asking. I think that the short answer is no. We're not preparing for a slowdown of our development and I think you'll find that we will be able to achieve very easily the guidance that we've given in terms of number of restaurant openings. But we do have a very strong pipeline coming in from our real estate teams who have been doing an excellent job finding a lot of terrific sites. But the reason for my comments was that as we've had a slowdown of sales overall that you're all aware of, and the numbers that Jack spoke about with a slowdown of nationwide sales as a result of what happened in late 2015. So too has that slowdown affected our new store openings. But it's not – it's affected them disproportionately. What I mean is that most of our new restaurant openings have still held the same percentage that they historically have held versus our trailing 12-month sales of all our existing stores. But the exception is that in the new markets and developing markets, in those markets there's been, I…

Thank you. Montgomery F. Moran - Co-Chief Executive Officer, Secretary & Director: Thank you.

We'll go to a question from Jason West with Credit Suisse. Jason West - Credit Suisse Securities (USA) LLC (Broker): Yeah, thanks. Jack, just wanted to come back to the guidance that you talked about on the promo and marketing expense going forward. You said you want to get that down to 3% to 4% of sales, I think, over the next few quarters. I believe it was over 6% in the first quarter. So, are you guiding us to promo marketing in sort of 2Q, 3Q in the 5%-ish type range, or is it not going to be that much of an impact? If you could help us there, it'd be great.

Yeah. No, I'd mentioned it'd be in the 3% to 4% range. Now, keep in mind our sales during the second and third quarters are higher. So you're talking about a 3% to 4% figure on top of higher sales. So it'll be meaningfully reduced, and what you'll see is the reduction is going to be in the promo. We hit promo, as you know, very, very heavy. We gave away about 6 million entrées during the first quarter and we did that intentionally. We wanted to hit that really hard, we wanted to signal that the event was over. We signaled that within a week or two after the CDC called their investigation over, and so we did that intentionally. Going forward, as Mark mentioned, we're going to be transitioning to more BOGOs, which have a lesser impact on our promo line. Offsetting that, we're actually going to spend more on advertising during the second quarter for sure, probably third quarter. But overall, I would expect that to be in the 3% to 4% range. Now, that's still higher than historical, because if you look at second quarter and third quarter of last year, I think, that's right around double or a little more than double what we did as a percentage of sales last year. Jason West - Credit Suisse Securities (USA) LLC (Broker): Okay. And is that number still though TBD, depending on the sales that you're seeing? So if your comps are not progressively improving, is that a number you're going to come back and revisit, or do you guys feel like that's the type of number that's really going to get the sales going?

No, listen, we're not locked to a number at all. That just happens to be the number based on the next wave of the strategy. We're moving into more brand advertising, moving into more of the BOGOs. That just happens to be the number. We're prepared to do what we need to do to continue to invite customers in, to continue to give them a great experience. And so if we needed to invest more, if we thought that would be a good investment, we would certainly make it. But right now, we're thinking it's going to be in that 3% to 4% range. Jason West - Credit Suisse Securities (USA) LLC (Broker): Okay. And, Mark, can you just explain a little bit on the loyalty piece that you mentioned how that's going to work and is that a temporary program or not? Mark Crumpacker - Chief Creative & Development Officer: Yeah. I don't have enough details to tell you exactly how it's going to work right now, but it is a temporary program. What we've seen and I mentioned earlier is that there's been a slight decline with our most loyal customers in the number of times they actually visit Chipotle per week. And so we would love to get that, have it back up, and so this was a way and we've got a couple of different technological ways of doing it. So I don't really want to go into those because I'm not sure which ones or if either will prove to be completely viable. But we do believe it's beneficial to us to get people back into the habit of visiting Chipotle at a frequency level that they enjoyed prior to the issue. So it would be something that we would do through the summer and perhaps into the fall but not something that would become permanent. There is, of course, always the possibility that we would create some sort of a permanent program, but that would take more time and planning, and so this is a temporary one for now. Jason West - Credit Suisse Securities (USA) LLC (Broker): Thank you.

The final question today is from Jeff Farmer with Wells Fargo.

Thanks. Jack, I just wanted to better understand or confirm some of the numbers you discussed today. So I think you said that April same-store sales, at least to date, are down 22%, but that included the benefit of an Easter shift. And had we excluded that benefit from the Easter shift, it would've been down about 26%? Is that correct?

That's correct.

Okay. So I guess then the question becomes so that down 26% sounds like it's essentially in line or even a modest sequential acceleration of same-store sales decline from what you were seeing at the end of March. If that is the case, how do you explain that?

Yeah, Jeff, it is because we saw early March was down 22%, then we have the news coming out of Boston, our sales spiked up to – or spiked down to a down 27% for a couple of weeks near the end of the month, and you've got a lot of choppiness with Easter this year at the end of March, and then you compare it to Easter last year in early April. But we are starting to see recovery back into that low to mid-20% range at the end of March. Our sales dollars, we moved from the end of March to April, got better. They improved by in that 3% to 4% range, but we're comparing to seasonal sales that in the past and last year kind of followed the pattern of increasing more like 6% to 7% range. So our dollars moved up just from March to April from late March which is in that low to mid-20% range. Our dollars from that range moved up in April but because of the tougher comparison, our comps did retrench a little bit and they move back to 26%. Now, in the last week, we've seen a number of days in a row, it's not a pattern yet but we've seen a number of days in a row that have gotten back into that mid to low 20% range. And so we're hoping that maybe seasonality just is showing up a little bit late where we're going to get that bump. We do know that there was some cold and some wet weather throughout parts of the country early in April. And so we'll see whether we're going to get this up or not. But, yeah, our comps did get worse, but our sales dollars did continue to move up from March to April.

Okay. And then just one more. I know you're reluctant to provide Q3 EPS guidance, but is there potential for this to be another loss? It seems like that would be, at least in my opinion, a little bit surprising given just the sheer magnitude of the promotional costs that you were throwing at this business at Q1, including a lot of the costs that were basically headed toward the Q2 transactions. So, again, understanding the reluctance, is that in the realm of possibility...

I would not. Yeah, Jeff, listen, it's so hard to predict because I gave almost excruciating detail about the sales during the quarter and then in April just to give you an idea of how volatile it is, how tough it is for us to see is the recovery taking hold and then it gets interrupted by the news out of Boston. And so I wanted to give you as much detail as possible. So with all that volatility, it's hard to predict. But I would not expect a loss in the second quarter. I would expect that because we have fewer of the one-time costs, because I would expect to see some recovery, because second quarter is seasonally a better quarter for us compared to the first quarter, I would not expect to see a loss in the second quarter.

Okay. And then can I sneak in just one more real quick?

Sure. You ask – now you're going to ask me what EPS is going to be in the second quarter, aren't you?

No, no, no, not at all. Just on the labor line, I just looked at this one. So look, we all sort of look at the dollar costs for operating week numbers. It looked like you did a pretty good job of – at least they fell year-over-year. So the question becomes – I know you pointed to going back to over the last quarter that some inefficiencies surrounding both staffing in restaurants and managing food waste. I'm just trying to get a better hold on your ability to sort of maximize efficiencies or minimize those inefficiencies, I should say, in terms of both labor scheduling and controlling your food waste. Do you guys think you've made some big steps?

I wouldn't say we have, Jeff. I know there's inefficiencies in there. We're really not going to go hard after them. When you look at labor, for example, labor is worth, I think, 850 basis points, of that 600 basis points of that is deleveraged because of sales. And so the most important thing we can do is get our sales back. Another 100 basis points is due to the very heavy promo that we did in the first quarter. So we had a lot of people visiting, a lot of people dining at Chipotle but they didn't pay for all or part of their meal. Yeah, we have to staff the restaurants, so there's about 100 basis points of that and then there's another, I think, it's 150 basis points to 200 basis points or so of, what I'll call, inflation. It's stuff that we did last year. We had merit increases for our managers and crew. We rolled out or introduced an education program, college education or education but usually college education. We started to pay for sick pay and then we enhanced our vacation pay. So those are all inflationary things that were in that kind of 150 basis points to 200 basis points range. So those are the big pieces. Underneath all that is there some efficiencies? Sure, but maybe that's 100 basis points or so. We don't want to go out and squeeze labor right now and drive those efficiencies at a time when what's most important is for us to have a fully staffed team to have the four pillars in place, have a team that feels ready to greet customers when they come in and hopefully at an accelerated rate. So I wouldn't want to go after 100 basis points on the labor line when what's most important is to have a great experience and let's encourage the sales probably to happen.

All right. It makes sense. Thank you.

Great. Thanks, Jeff.

And at this time, we'll turn it over to our host for any additional or closing remarks.

Thanks, everyone, for joining the call today. We look forward to updating you on our second quarter conference call planned for July 21. Thanks again.