The following tables provide a reconciliation of non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP.
Adjusted net income is net income excluding restaurant asset impairment and stock-based compensation retention.
Adjusted diluted earnings per share is calculated by dividing adjusted net income by the diluted weighted-average number of common shares outstanding.
Adjusted general and administrative expenses are general and administrative expenses excluding expenses related to stock-based compensation expense for specified retention equity awards.
The adjusted effective income tax rate is the effective income tax rate adjusted to reflect the after-tax impact of non-GAAP adjustments.
Restaurant level operating margin is equal to the revenues generated by our restaurants less direct restaurant operating costs, which consist of food, beverage and packaging, labor, occupancy and other operating costs, expressed as a percent of total revenue. This performance measure primarily includes the costs that restaurant level managers can directly control and excludes other costs that are essential to conduct our business. Management uses restaurant level operating margin as a measure of restaurant performance. Management believes restaurant level operating margin is useful because it highlights trends in our core business that may not otherwise be apparent when relying solely on GAAP financial measures.
We present these non-GAAP measures to facilitate a meaningful evaluation of our operating performance across periods. These adjustments are intended to provide greater transparency of underlying performance and to allow investors to evaluate our business on the same basis as management, which uses these non-GAAP measures in evaluating our performance.
Our adjusted net income, adjusted diluted earnings per share, adjusted general and administrative expenses, adjusted effective income tax rate, and restaurant level operating margin measures may not be comparable to other companies' adjusted measures. These adjustments are not necessarily indicative of what our actual financial performance would have been during the periods presented and should be viewed in addition to, and not as an alternative to, our results prepared in accordance with GAAP. Further details regarding these adjustments are included in the tables below.
Certain non-GAAP measures presented on a forward-looking basis during our investor conference call, such as adjusted general and administrative expenses or restaurant level operating margin for our fourth quarter 2026, were not reconciled to the comparable GAAP financial measures because the reconciliation could not be performed without unreasonable efforts. The GAAP measures are not accessible on a forward-looking basis because we are currently unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact GAAP measures for these periods but would not impact the non-GAAP measures. Such items may include corporate initiatives, litigation expense, impairments on long lived assets, and other items. The unavailable information could have a significant impact on our GAAP financial results.
CHIPOTLE MEXICAN GRILL, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Adjusted Net Income and Adjusted Diluted Earnings per Share (in thousands, except per share amounts) (unaudited)Three months ended September 30, | ||
2026 | 2025 | |
Net income | $ 339,874 $ | 382,103 |
Non-GAAP adjustments: Impairment and exit costs: | ||
Restaurant asset impairment(1) | 4,339 | - |
Stock-based compensation(2) | 1,475 | 8,058 |
Total non-GAAP adjustments | 5,814 | 8,058 |
Tax effect of non-GAAP adjustments above(3) | (1,108) | (298) |
After tax impact of non-GAAP adjustments | 4,706 | 7,760 |
Adjusted net income | $ 344,580 | $ 389,863 |
Diluted weighted-average number of common shares outstanding 1,267,703 1,339,522 | ||
Diluted earnings per share | $ 0.27 $ | 0.29 |
Adjusted diluted earnings per share | $ 0.27 $ | 0.29 |
Operating lease asset and leasehold improvements, property, plant and equipment impairment charges and other expenses for restaurants due to closures, relocations, or underperformance.
Stock-based compensation for retention equity awards granted to certain executives in connection with the former CEO's departure.
Adjustments related to the tax effect of non-GAAP adjustments, which were determined based on the nature of the underlying non-GAAP adjustments and their relevant jurisdictional tax rates.
2026 | 2025 | |
General and administrative expenses | $ 185,228 | $ 146,742 |
Non-GAAP adjustments: | ||
Stock-based compensation(1) | (1,475) | (8,058) |
Total non-GAAP adjustments | (1,475) | (8,058) |
Adjusted general and administrative expenses | $ 183,753 | $ 138,684 |
Stock-based compensation for retention equity awards granted to certain executives in connection with the former CEO's departure.
2026 | 2025 | |
Effective income tax rate | 25.6 % | 23.1 % |
Tax impact of non-GAAP adjustments(1) | - | (0.3) |
Adjusted effective income tax rate | 25.6 % | 22.8 % |
Adjustments related to the tax effect of non-GAAP adjustments, which were determined based on the nature of the underlying non-GAAP adjustments and their relevant jurisdictional tax rates.
Percent of total | Percent of total | |||
2026 | revenue | 2025 | revenue | |
Income from operations | $ 451,964 | 13.7 % | $ 477,172 | 15.9 % |
Non-GAAP Adjustments | ||||
General and administrative expenses | 185,228 | 5.6 | 146,742 | 4.9 |
Depreciation and amortization | 102,611 | 3.1 | 90,524 | 3.0 |
Pre-opening costs | 15,104 | 0.5 | 13,741 | 0.5 |
Impairment, closure costs, and asset disposals | 13,250 | 0.4 | 7,404 | 0.2 |
Total non-GAAP Adjustments | 316,193 | 9.6 | 258,411 | 8.6 |
Restaurant level operating margin | $ 768,157 | 23.3 % | $ 735,583 | 24.5 % |