Good day, ladies and gentlemen, and welcome to today's Chipotle Mexican Grill, Inc. Fourth Quarter and Full-Year 2016 Earnings Conference Call. Today's conference is being recorded. And at this time, I'd like to turn the floor over to Mark Alexee, Investor Relations Manager for Chipotle Mexican Grill. Please go ahead, sir.

Thank you, Greg. Hello, everyone, and welcome to our call today. By now you should have access to our earnings announcement released this afternoon for the fourth quarter and full year of 2016. It may also be found on our website at chipotle.com in the Investor Relations section. Before we begin our presentation, I will remind everyone that parts of our discussion today will include forward-looking statements as defined in the securities laws. These forward-looking statements will include statements of our management's business outlook, forecasts for comparable restaurant sales trends, estimates of food, labor, occupancy and marketing cost trends for future periods, G&A and other cost savings for the full-year 2017, and descriptions of the impact of new technologies on our business, projections of effective tax rates for 2017, projections of capital investments and statements of our stock repurchases, as well as other statements or expectations and plans. These statements are based on information available to us today, and 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 Reports on Form 10-K, as updated in our subsequent Form 10-Q for a discussion of these risks. I'd also like to remind everyone that we have adopted a self-imposed quiet period, restricting communications with investors during that period. The quiet period for Q1 will begin on the 15th day of the last month of each fiscal quarter and continues until the next earnings conference call. For the first quarter of 2017, it will begin March 15 and continue to our first quarter earnings release planned for April 25. We will start today's call with prepared remarks, and then we will take 20 to 30 minutes of questions. Because we recently presented our 2017 strategy at the ICR conference, our prepared remarks today will be brief before opening the lines for Q&A. We ask that you please limit your questions to one or two per individual. On the call with us today are Steve Ells, our Chairman and Chief Executive Officer; and Jack Hartung, Chief Financial Officer. We will also have Mark Crumpacker, our Chief Marketing and Development Officer; and Curt Garner, our Chief Information Officer, available for questions. With that, I will now turn the call over to Steve.

Thanks, Mark, and good afternoon, everyone. Thanks for joining us. Today, I'm more confident than ever about Chipotle's future. I believe firmly in our mission to ensure that great food made with whole unprocessed ingredients is accessible to everyone. And I'm very encouraged by our rapid progress toward simplifying our operations and ensuring that we deliver an extraordinary dining experience for each and every one of our guests, in each and every one of our restaurants. I'm also confident in the significant changes we've made throughout the last year to position Chipotle for a strong performance in 2017. These efforts include the implementation of an industry-leading food safety system, investments in digital to enhance customer convenience of ordering, expanded use of consumer data and analysis, and changes to our leadership to strengthen our culture and sharpen our focus on the customer. Our business was built on doing just a few things and doing them extremely well. As we continue to restore our economic model, I'm most optimistic about our renewed focus on simplifying our restaurant operations and delivering an excellent guest experience. Our restaurant teams and field leaders are quickly embracing this new focus with enthusiasm. As we closed out the quarter and shifted to implementing our strategic plan for 2017, our teams are more motivated, more focused, and more energized than they have been in years. For the fourth quarter of 2016, we generated revenue of $1.03 billion, an increase of 3.7% on comparable restaurant sales decline of 4.8%, and the opening of 72 new restaurants. This produced diluted earnings of $0.55 per share for the quarter. Our comparable restaurant sales improved to a positive 14.7% in December, as we lapped the softer comparison from December 2015. Since our last update at the ICR conference in January, we've continued…

Thanks, Steve, and good afternoon, everyone. As we start the new year we're optimistic about the direction we're headed. And we've already seen encouraging signs of improved restaurant operations. We finished the year with three consecutive months of improvements in each of our three internal customer satisfaction scores. Our restaurant teams and field leaders are quickly responding to our recent pivot to simplify restaurant operations, and they are keenly focused on delivering an excellent customer experience. These are early days with this new renewed focus on the customer, but we are proud of how our teams have responded, and it gives us great confidence that we're on the right track. With the change in the focus of our restaurant teams, which includes incentivizing and rewarding an elevated customer experience combined with our strategic initiatives related to digital and marketing Chipotle brands, we're are optimistic about our ability to one, grow our sales, two, improve our margins over time, and three, allow us to invest and building long-term shareholder value. There remains a lot of hard work ahead of us, but we believe in our vision, we believe in our strategy and we believe in our team's ability to continue to drive operational improvements. During December, we recorded positive monthly comp of 14.7%, which includes a 60 basis point benefit for deferred revenue related to Chiptopia. The sales comparisons ease in January as we're comparing to a down 36% versus a down 30% in December of 2015. But the dollar sales trends continued from December into January, and the January preliminary comp improved to 24.6%, which included a negative trading day of over 100 basis points, slightly offset by 20 basis points positive related to Chiptopia. For the first 28 days in January, the comp was 26%. But in the last…

And our first question comes from David Tarantino with Baird. David E. Tarantino - Robert W. Baird & Co., Inc.: Hi. Good afternoon. Jack, just a question about the outlook for this year. I know you gave a lot of the pieces there in your commentary, but last quarter you outlined a goal or guidance of getting to around $10 in earnings per share, and there was no comment around that figure this time around. So could you just talk about whether that number is still in play in your mind? Or whether that's changed since the last time you commented?

Yes, David. We had talked about that in the third quarter that we had a stretch goal of $10 EPS during 2017, and a stretch margin of 20%. Those are still in play. We are still shooting for those. We didn't include those only because we discussed those at length at ICR and in other investor conferences. We've characterized those as reasonable, but stretch goals, and so they are still in play. I'd like to think, for example, the 20% restaurant level margin is something that we still expect to get to that sort of a run rate during the year, to make sure that we leverage the P&L as our sales have turned positive now. Make sure we drive operational efficiencies, make sure we do everything we can to restore our economic model. And we believe we can get to a run rate of right around that 20% restaurant level margin. Now will we get to that run rate in time so that we can deliver the full $10 in EPS and deliver an overall 20% margin? That's where the stretch comes in. So it's still a goal that's in play, David, but we're not characterizing it as normal guidance, if that makes sense. David E. Tarantino - Robert W. Baird & Co., Inc.: Great. That's helpful. And then I guess on that last point on the run rate on the margin, can you talk about – I guess is the idea that that would be the run rate that you would carry over into 2018? Or would you exit the year at a higher rate so that 2018, all else being equal, would be higher than 2017?

Yeah, the idea behind the 20%, David, was based on kind of what our current volumes are right now and what we put out there as a comp guidance in the high-single digits is we think that our model has the potential, if we can do everything right from an execution standpoint, that we can deliver around that run rate of around 20%. If we end the year with momentum in comp and we see ourselves continuing to drive positive comps in 2018, that margin has upward potential. I've stated a number of times that if we can get all of our sales back, so if we can return to a $2.5 million restaurant company that we have the ability to fully regain all of our margin up to that 26%, 27% or higher. Now there are pieces of that, that we've been absorbing; for example, inflation. We've not had a price increase in three years. We're not planning any specific price increase right now. But at some point over time, we'll need to pass on some of the higher costs. But we believe we'll be able to do that. And then that along with leverage from the higher sales, that along with better negotiation, that along with better management at the restaurant level and holding the line on the P&L, on individual P&L line item. We still think we have the ability to recapture the high 20% margin range. The most important factor, though, year-by-year, is sales, how much we can build in terms of sales. David E. Tarantino - Robert W. Baird & Co., Inc.: Great. Thank you.

And moving on, we'll hear from Jeff Farmer with Wells Fargo.

Thanks. Just following-up on David's questions, can you guys provide some detail on the expected timeline for your cost control efforts on both the labor and food cost lines? I'm just curious how quickly we can see those benefits. Jack, if there's anything you can tell us about the cadence in which you'd expect to see some of those initiatives pay some dividends for you guys.

Yeah, Jeff, it's going to be hard and I really don't want to peg specific quarters. At ICR, we talked about, there's risk levels of everything we need to do to get to that kind of a 20% run rate. Some of the things like avocados have already come down, so that's going to happen. You're already going to see food costs improve during the first quarter. Other items, strategically doing a better job of managing our food costs during the year, that will happen over time. And so to say exactly when we will achieve the full savings that we potentially get at restaurant level, I don't want to commit to that. We could move really quick on that – quickly on that. And what's likely to happen is that our restaurants are going to move too quickly and portion size might be reduced; holding times might increase so that the quality experience might be reduced. Instead, what we want to do is make sure that we are ordering correctly, we're scheduling the right prep, that we're scheduling people during the right time. And we want to make sure that we're doing that in the right way every time. So I'd rather talk about it as we expect to get to a run rate during the year, Jeff and rather than commit to it in terms of specifically which quarter. And of course, the biggest variable here is the sales building. And so that's been the biggest variable in the last year, the hardest to predict. And so, our ability to recover our margins is highly contingent upon how we proceed in terms of the comps from here on out.

And just one quick follow-up. You were asked about this at ICR, but just in terms of some color on the performance of those TV tests, I think it was in three markets, I think it was November-ish timeframe. But more specifically, where you tested TV, if those markets held on to any relative same-store sales performance in the weeks following the tests. So again, any color you can provide in terms of how impactful those marketing or TV tests have been would be helpful.

Sure, Jeff. This is Mark. The tests, as I mentioned at ICR, were – had the results I more or less expected, but it's somewhat mixed. So the results that we saw were basically an outsized level of awareness relative to the media buy, which is typical for television. But it's notoriously difficult to tease apart which part of the comp is a result of which part of the marketing or whether or not it was weather or competitive pressures or whatnot. But what I will say is that we saw a lift in two of the three markets where we tested. We actually saw a negative trend in one of the three markets. That's why I say it's mixed, so it's very difficult to tell the – to determine these things. So I can't tell you that we necessarily held or didn't hold the comp because it just wasn't big enough over that period of time for us to have seen – been able to identify the trend clearly. But having said that, it was a relatively small test. So these were three markets and it was just over a month of run for those spots, which really isn't a lot in the world of television. So the way to look at it going forward is as we launch our new campaign in April, there will be a video component, some of which will be on television. And it will be in a much more sustained run of the buy. So that will give us a much, much better sense of how television is performing. But the test as I mentioned, did confirm for me what I more or less thought it was going to do. But it certainly – that test wasn't a silver bullet.

All right. Thank you.

Sure.

Moving on, from RBC Capital Markets, we have David Palmer.

Thanks, good evening. You've discussed digital ordering, the new marketing, the simplification of operations. If you end up seeing your two-year trend rebuild through the year, what do you suspect will be the biggest reason for that rebuilding?

Well, okay. We've – I'm not sure, you might get a different answer from each of us. I think it's going to be based on the way we execute in the restaurant delivering a great customer experience, because that includes making sure the restaurant is clean, the line, the serving line is clean, that throughput is fast, that our crew is just providing an overall excellent experience. And when we execute well in the restaurant everything else is going to work well also. We have a better shot at executing digital, and so I think the single biggest thing we can do and the thing that we've been focused on really intently is to simplify our operations, make sure that our teams know clearly what it takes to deliver an excellent customer experience, which they do. That's the thing they do the best. If anything, we've maybe complicated it in the past. We've really de-mystified that, we've uncomplicated it, we're tying incentives to delivering an excellent experience. And I think that's the single biggest thing that will drive our sales during the year.

And if you see certain metrics, what metrics will you look at this year to contemplate a potential price increase? You've talked about that being something you'll contemplate at some point. What will you look at to think about doing that?

Yes, David. We would look at our strongest markets, the market that have recovered the best, the markets that weren't impacted in the first place. And we'll look at markets where our operations are strong. And then we'll look at what competitors are doing. We don't have any plans right now, specific plans, but at some point we'll dip our toe in the water, and we'll take a market where there is a very low risk. And when the trends continue to build, and again, we're confident about our teams, we're confident about our pricing power, we're confident about we've got room to do this compared to our competitors. We'll at some point decide to dip our toe in the water and see how well that goes in that market. If that goes well, we'll consider what we do from there. But no specific plans right now to do anything with price.

Thank you.

Your next question comes from Sara Senatore with Bernstein. Sara Harkavy Senatore - Sanford C. Bernstein & Co. LLC: Thank you very much. I just wanted to ask a little bit more about the comp recovering (30:07), the volumes that you are seeing in both existing and new stores. And on the existing stores, I think as was referenced, a lot of us are inclined to look at two-year trends to control for ease or difficulty of comparison. So with that in mind, it looks like you are seeing a nice acceleration. Is that how you are thinking about the volumes? That you are in fact seeing, if you control for seasonality, a pretty nice improvement versus what appeared to be no real change through last year? And then on the new unit volumes, could you just talk about productivity there? I know in the past you have said when you market around new unit volumes – or new unit openings you see some improvement. But can you just talk a bit about if that's continued?

Yes, I will take the question on the comp, Sara, and then I'll turn it over to Mark on the new stores. The way I would say it is – I feel good about the comp trend. I feel like we're at least holding our own and perhaps starting to see an inflection point. But most importantly, we are doing this with very little promo. So we've weaned ourselves off of promo. Most of the improvement from December into January was we're going up against a softer comp, but I feel really good about that. And January is not a great month to get a perfect read on the trends. When you look at it day-by-day and week-by-week, you do see some volatility because of weather this year, weather last year. But when we look at it day-by-day, week-by-week, we feel good about what we're seeing, we feel good about holding onto or perhaps building sales from the previous trends. We're also seeing geographically that the Northeast has made a nice move in January, and so they've come back to the pack. And so we talked about the coast being the weakest, but during January, we saw the Northeast really come back to the pack quite a bit. And so the West Coast is still remained to be an outlier, so that was a nice move. And so we'll, Sara, continue to watch what happens during February. And then as the weather clears, but we feel pretty good about the trend so far. Sara Harkavy Senatore - Sanford C. Bernstein & Co. LLC: Okay.

And then Mark, you want to...

Sure. Yeah, Sara, with regard to the new restaurants, they're performing right now at about 74% of our regular restaurants, which is an improvement, it got as low as 70% during the crisis, and we do see that the stores that we market are performing better. So now all new restaurants receive marketing at their opening. The other change that we've made with regard to new stores is the way we're choosing real estate, particularly in developing markets. As you know, we have our, or you may know, our real estate markets are categorized into four different categories, knew, proven, established, and developing. And in developing markets, we've reverted to choosing only Tier 1 sites, which we expect will have an ongoing effect on improving the ADS (33:21) in those restaurants. So all said, we're confident in where the new restaurants are headed and in the strategy around choosing those and in marketing. Sara Harkavy Senatore - Sanford C. Bernstein & Co. LLC: Thank you.

Next from Bank of America, we'll hear from Gregory Francfort.

Hey, guys. Just going back to the margin question, maybe looking back at 2010 to 2015, I think you guys held the 26% to 27% restaurant margins on volumes that went from 18% to 24%. Can you talk about maybe why that was? And then as you look forward to 2018, do you need $2.5 million volumes to get to 27% restaurant margins? And how does that play together?

Yeah, Greg, if you look back to those periods, depending on what you look at, you're going to see a much different food cost. We in the fourth quarter had a 35.3% food cost. When you look back into those periods you're going to see a food cost somewhere in the 30%, 31% range, there's 400 basis point right there. The other piece is labor inflation. Since 2012, we've had labor inflation totaling about 20%. We have only taken about 5% of a menu price increase in that time, and so we've eaten a couple hundred basis points worth of labor inflation, at least, maybe even more. And so the food cost is higher because of things like, we've had inflation at steak, we've invested in Food With Integrity, things like that, And because we are a little bit behind right now menu pricing, I would say our food is at an elevated level, we've been eating some of the higher food costs over time, same thing with the labor. And so we need a combination, frankly, of getting our volume back, getting back into the $2.5 million range, delivering on some of the efficiencies that we've talked about, and passing on some of these higher costs to our customers. And if we do all that, I think we can get back into the high 20s%. If we only stayed at this current volume, $2 million, or so, I think it would be a stretch to consider getting some margin in the mid-20% range or higher, unless we wanted to just jam a very high menu price increase, but that's never been part of our strategy, because we want to be accessible to the masses. We want to remain affordable.

And then maybe just to follow-up, like to get to the 20% margins, I guess what sort of volumes do you need to do?

Well, it's within our guidance range. We talked about a guidance range for the year of in the high single-digits. So if we can achieve that kind of a comp, then achieve some of the negotiated savings that we've talked about, and achieve the operational savings, principally in food and labor, we think we can get up to – in the range of that 20% run rate.

Thanks. Very helpful. Appreciate it.

Thanks, Greg.

Next question comes from Karen Holthouse with Goldman Sachs. Karen Holthouse - Goldman Sachs & Co.: Hi. Thank you for taking the questions. Looking at just sort of unit by unit and the initiatives to better manage cost of sales and labor, is there any sort of difference in the success rate you are having for stores that might be seeing more versus kind of less volatile week-to-week or day-to-day sales trends?

I'm not sure I understand the question, Karen, so unit-by-unit, when we see – are you trying to link our cost savings initiatives with sales building initiatives, to see if there's a correlation? Karen Holthouse - Goldman Sachs & Co.: No, is there a correlation between units that might be – you had talked about just sort of week-to-week, day-to-day sales trends staying somewhat volatile. Are sort of the cost management initiatives going better or a little bit easier to wrap your heads around in stores that might be seeing a more consistent and less volatile sales trends?

Oh, yeah, yeah, yes. The answer is yes. And the volatility is not unit-by-unit; it's more market-by-market based on geography. But yes, it's a lot easier to manage food and labor – labor especially when you have predictability. And so when you have volatile weather, we have a snowstorm one day, your tendency is to probably have too many people on the staff and certainly even send people home. But generally, you are going to have deleverage, you're going to have excess labor, maybe excess food, although we don't usually – we have multiple deliveries a week, and so we don't usually have a problem unless we are closed because of a snowstorm for multiple day. But there's question about it. When we have predictability of the sales, we can do a better job of managing things like labor. Karen Holthouse - Goldman Sachs & Co.: Okay. Thank you.

Thanks, Karen.

Next from Morgan Stanley, we have John Glass. John Glass - Morgan Stanley & Co. LLC: Hey. Thanks very much. First, in your plans to roll out and accelerate digital, does that include activating that second line you've talked about? And maybe I'm having a hard time imagining it, but is it the kind of thing where you'd have to set it up for peak periods, staff it, and then break it down when it gets quieter? Or do you not need that second line, that's not really part of the plan for the first phase of digital?

I'll start with it, and then Curt may want to add on. John, a second make line is a huge part of it. It's a critical part of it. We have the second make line in most of our stores, some 90-something percent. I don't have the exact number. It is underutilized in a lot of our stores. In the 1,200 stores that we've already rolled out smarter pickup times, all of those stores already have a second make line specialist, a takeout specialist. We rolled out specifically to those stores first because we knew that they were staffed. We already knew that they have a skill and already the habits of using that second make line and executing well on the second make line. The stores that are going to roll out next week are the lower-volume stores. They don't necessarily have a takeout specialist, a trained takeout specialist. The $2 million investment that I described, that is an investment in labor for those teams to open up that line. It is going to be in excess of – kind of an advanced investment because if the sales – or as the sales come, our labor matrix will fully fund and fully allow those hours and we'll have normal margins. But we don't want to wait for the sales, execute poorly and then say, oh, we better start adding some labor. So we're going to front-load that a little bit, invest some extra labor in those stores. And then we'll be able to adjust. If stores stay low volume, we'll be able to adjust and make sure that we have the appropriate amount of labor. But we're optimistic that we're going to see additional digital second make line sales in all of our stores, and that will justify the labor investment that we're making in February. And it'll be fully part of the labor matrix. John Glass - Morgan Stanley & Co. LLC: And if I could just follow-up, can you just refresh our memory from last year first and second quarter when you were doing more promotional activity? Were all transactions accounted for in comps or were the free burritos not recorded in the top line? And then was all the cost associated with that, was that all in the other operating expense line? Or was there anything else, for example in food costs, that related specifically to those promotions?

Yeah, John, when we have promotions, none of that would be in the sales because we would – it would be free. You would see the entire cost of that. So we would take the costs related to the food that we're giving away, all of that would be other and that would be in promo. And so for example, when we talk about 4.7% of sales in the fourth quarter being marketing and promo, the promo part of that is buy one, get ones or free chips and guac and things like that. So that's how you'd see the pieces. John Glass - Morgan Stanley & Co. LLC: But to be clear, you wouldn't record a transaction if someone came in and got a free burrito?

Yes. We would record our transactions. So when you saw us report last year, if we did a, say, a – where transactions outperformed sales, that would be because if you came in and you got a free burrito, we would count you as a transaction, yet there would be no sales. John Glass - Morgan Stanley & Co. LLC: Thank you.

Thanks, John.

Moving on, we'll hear from Sharon Zackfia with William Blair. Sharon Zackfia - William Blair & Co. LLC: Hi. Good afternoon. Just a quick question on the Northeast and the improvement there. I think you might have done some leadership changes in the Northeast as well. So if you could maybe talk about what you think the causal elements have been in the Northeast.

Yeah, it's – I don't know yet, Sharon, whether I can attribute it to that. I'm very confident in the team out there, and I'm very confident that they will drive not only operational savings and customer experience improvements and that will lead to better sales. And so we may be seeing some of those early dividends. It may also be just a little volatility with the winter weather, but it looks pretty good to me. It looks like they closed the gap in a pretty meaningful way. So I'd like to say that yeah, the folks out there, even though they've only been out there a couple months, that they're already making a difference. But I know they still got their work ahead of them. But I'm optimistic that this is the right team. They are some of our top proven leaders that have gone in other markets and done a really fantastic job of hiring great people, training them and delivering a great experience. So it probably is some early dividends on that, Sharon, but it's really hard to tease out how much is that versus how much is just other factors.

All right. And moving on, we'll take our last question from John Ivankoe with JPMorgan.

Hi. Thank you very much. First, Jack, just a very basic question. I even apologize for asking it. The first quarter, for a lot of different reasons – the year-ago comparisons, the promos, the closed store, leap day – there's a lot of things that make the first quarter unusually difficult to predict from a comp perspective. And I know you've given full-year guidance and you don't typically give a quarterly guidance. But with you having access to all the data and just seeing the overall trend in customers, is it fair for me to ask somewhat of a comp range for people to expect in the first quarter because I fear expectations might be a little bit all over the place?

Well, it's fair to ask but we're not going to give it. We're thinking about building this business over more than just a quarter at a time. We're focused on running great restaurants. We're focused on the customer. We're focused on digital; focused on brand marketing and focused on restoring our economic model. So to breakout prediction quarter-by-quarter and then being defined based on those quarter-by-quarter predictions just isn't really helpful for us right now. So sorry, John. We're not going to do that, but we'll continue to give you updates each quarter. And we'll give you as much insight as we can about what we're doing, how we're doing. And I think that's a better way to discuss the – how the trends are going.

I completely understand. I thought maybe we could get away with it just for this one quarter.

It's always worth a try.

And then secondly, if I may, separate, could we talk about the direction of employee turnover, I mean maybe where that – you kind of peaked in 2016, what's happening with turnover now and if you're starting to see a market change, or I suppose improvement in turnover? And how you think that may be influencing your execution at the store level?

Sure. So there's no question that we saw accelerating turnover rates post crisis for a number of reasons that we've talked about in the past. Laying on a lot of complexity to the teams, not – just a lot of new food safety initiatives, things like this. And so it's complicated for our teams, and that was one of the reasons that there was turnover. I will say, though, that since we have made it very, very clear how we find success in our restaurants now and how we get our restaurants to A and then on to restaurateur. The clarity and the understanding of how to do that has really helped morale. It's palpable. We can feel it in the restaurants. I think our folks appreciate that we've simplified it. I think that in our past, the tools that we had were sometimes more complicated than actually running a good restaurant. So we've really allowed now our folks – with great training, with a clear path to restaurateur, we've really allowed them to thrive. And so we're starting to see a great morale. And I think this is going to contribute to lower turnover throughout the year.

Thank you.

All right. And, ladies and gentlemen, that does conclude the question-and-answer session. I'd like to turn the floor back to Mark Alexee for any additional or closing remarks.

Great. Thanks, everyone. Thank you for joining us today, and we look forward to speaking with you to discuss our first quarter results in late April. Thanks again.

And, ladies and gentlemen, that does conclude today's conference. We appreciate your participation. You may now disconnect.