Chipotle Mexican Grill Inc. (NYSE:CMG)

The provision for income taxes exhibited a generally increasing trend from 2021 to 2024, followed by a slight decrease in 2025. This overall pattern is driven by fluctuations in both current and deferred tax components.

Current Tax

Current tax expense increased significantly from US$172.136 million in 2021 to US$325.625 million in 2022. This growth continued into 2023, reaching US$401.274 million, and peaked at US$519.057 million in 2024. A subsequent decrease to US$394.275 million was observed in 2025. The increases likely correlate with changes in pre-tax income levels, though further investigation would be needed to confirm this relationship.

Deferred Tax

The deferred tax component demonstrates more volatility. A deferred tax benefit was recorded in both 2021 and 2022, amounting to US$12.357 million and US$43.195 million respectively. This benefit transitioned to a smaller expense of US$9.505 million in 2023, followed by a larger expense of US$42.937 million in 2024. Notably, 2025 saw a substantial shift, with a deferred tax benefit of US$79.483 million being recognized. This suggests changes in temporary differences between book and tax bases of assets and liabilities, or changes in tax rates, or utilization of tax loss carryforwards.

Provision for Income Taxes – Overall Trend

The total provision for income taxes increased from US$159.779 million in 2021 to US$282.430 million in 2022, then to US$391.769 million in 2023, and reached US$476.120 million in 2024. The 2025 figure shows a modest decline to US$473.758 million. The overall increase from 2021 to 2024 indicates a higher tax burden relative to pre-tax income during those years, while the slight decrease in 2025 suggests a potential stabilization or minor reduction in that burden.

The interplay between current and deferred tax components significantly influences the overall provision for income taxes. The substantial deferred tax benefit in 2025 partially offset the current tax expense, resulting in a relatively stable total provision compared to the prior year.

The effective income tax rate exhibited fluctuations over the five-year period, while the statutory U.S. federal income tax rate remained constant at 21.00 percent. A review of the effective rate reveals variations from this statutory level, suggesting the influence of factors beyond the standard corporate tax obligation.

Effective Income Tax Rate - Overall Trend

The effective income tax rate began at 19.70 percent in 2021. It increased to 23.90 percent in 2022, followed by a slight increase to 24.20 percent in 2023. The rate then decreased to 23.70 percent in 2024 and further to 23.60 percent in 2025. This indicates a general trend towards convergence with the statutory rate, although some variability persists.

Effective Income Tax Rate - Initial Deviation & Subsequent Adjustment

In 2021, the effective income tax rate was below the statutory rate, indicating the presence of tax benefits or deductions that reduced the company’s tax burden. The subsequent increases in 2022 and 2023 suggest a reduction in these benefits or a change in the company’s earnings mix. The slight declines in 2024 and 2025 could be attributed to a re-emergence of certain tax advantages or changes in taxable income.

Effective Income Tax Rate - Stability in Later Years

The difference between the effective and statutory rates narrowed between 2023 and 2025, moving from 3.20 percentage points to 2.40 percentage points. This suggests a greater alignment of taxable income with the standard corporate tax structure during these years, or a stabilization of the factors causing the initial deviation.

The observed fluctuations in the effective income tax rate warrant further investigation to understand the specific drivers behind these changes, such as tax credits, deferred tax assets, state tax differences, or changes in the mix of domestic and international income.

The composition of deferred tax assets and liabilities exhibits notable shifts over the five-year period. A consistent increase is observed in the gross deferred tax asset, driven by several underlying components, while the deferred tax liability also demonstrates a steady upward trajectory. The net deferred tax position fluctuates, transitioning from a net asset to a net liability over the observed timeframe.

Stock-Based Compensation and Employee Benefits

This component of deferred tax assets shows a significant and consistent increase from US$45.261 million in 2021 to US$68.073 million in 2025. This growth suggests an increasing reliance on equity-based compensation plans or changes in the accounting for such benefits.

Operating Lease Liabilities and Assets

Both operating lease liabilities and associated assets demonstrate substantial growth throughout the period. Operating lease liabilities increased from US$909.528 million to US$1,293.631 million, while operating lease assets grew from US$851.324 million to US$1,217.124 million. This indicates an expansion in the company’s leased asset base and corresponding lease obligations. The growth in these items significantly contributes to the overall increase in deferred tax liabilities.

Foreign Net Operating Loss Carry-forwards

The value of foreign net operating loss carry-forwards generally increased from US$27.446 million in 2021 to US$43.148 million in 2025, with some fluctuation. This suggests potential future tax benefits from utilizing these carry-forwards, although the realization of these benefits is subject to future profitability and jurisdictional tax regulations.

Valuation Allowance

The valuation allowance against deferred tax assets has consistently increased from US$30.621 million in 2021 to US$45.388 million in 2025. This increase suggests a growing uncertainty regarding the realizability of a portion of the deferred tax assets, potentially due to concerns about future taxable income.

Capitalized Research Costs

Capitalized research costs appear in 2022 and increase through 2024, reaching US$29.122 million, before decreasing significantly to negative US$80 million in 2025. This fluctuation requires further investigation to understand the underlying reasons for the change, potentially related to changes in research and development activities or accounting treatment.

State Credits and NOLs

State credits decreased from US$3.595 million in 2021 to US$701 thousand in 2025, indicating a diminishing benefit from these credits. State net operating loss carry-forwards show a more moderate increase, from US$1.568 million to US$4.129 million, suggesting a relatively stable position in state-level tax benefits.

Net Deferred Tax Position

The difference between deferred tax assets and liabilities, representing the net deferred tax position, moved from a net asset of US$141.765 million in 2021 to a net liability of US$125.674 million in 2025. This shift is primarily driven by the faster growth of deferred tax liabilities compared to deferred tax assets, coupled with the increasing valuation allowance. This change could indicate a potential future increase in the company’s tax obligations.

Overall, the trends suggest a growing deferred tax liability base, largely attributable to operating leases, and increasing caution regarding the realizability of deferred tax assets, as evidenced by the rising valuation allowance. The transition from a net deferred tax asset to a net deferred tax liability warrants continued monitoring.

The deferred income tax liabilities exhibited considerable fluctuation over the five-year period. An initial decrease was followed by a period of stabilization and then a substantial increase.

Overall Trend

The balance of deferred income tax liabilities decreased significantly from 2021 to 2024, before increasing notably in 2025. This suggests changes in the timing of taxable and deductible temporary differences.

2021 to 2022

A substantial decrease in deferred income tax liabilities occurred between December 31, 2021, and December 31, 2022, falling from US$141,765 thousand to US$98,623 thousand. This reduction could be attributed to the realization of existing taxable temporary differences or changes in applicable tax rates.

2022 to 2024

From 2022 to 2024, the deferred income tax liabilities continued to decline, albeit at a slower pace. The balance decreased from US$98,623 thousand in 2022 to US$46,208 thousand in 2024. This continued reduction indicates a sustained realization of taxable temporary differences or further adjustments related to tax laws.

2024 to 2025

A significant increase in deferred income tax liabilities was observed between December 31, 2024, and December 31, 2025, rising to US$125,674 thousand. This increase suggests the creation of new taxable temporary differences, potentially due to changes in accounting practices or business operations, or the reversal of previously recognized tax benefits.

The volatility in deferred income tax liabilities warrants further investigation to understand the underlying causes and potential impact on future tax obligations.

The financial information reveals adjustments made to reported figures, primarily impacting liabilities, shareholders’ equity, and net income over a five-year period. These adjustments consistently result in modified values, suggesting a systematic removal of certain items, likely related to deferred tax assets and liabilities. The magnitude of these adjustments fluctuates annually, but a general pattern of increasing impact is observable.

Total Liabilities

Reported total liabilities demonstrate a consistent upward trend from US$4,355,584 thousand in 2021 to US$6,163,924 thousand in 2025. The adjusted total liabilities also increase over the same period, reaching US$6,038,250 thousand in 2025. However, the difference between the reported and adjusted figures widens over time, starting at US$141,765 thousand in 2021 and expanding to US$125,674 thousand in 2025. This indicates a growing impact from the adjustments, reducing the reported liability position.

Shareholders’ Equity

Reported shareholders’ equity exhibits volatility, increasing from US$2,297,374 thousand in 2021 to US$3,655,546 thousand in 2024, before decreasing to US$2,830,607 thousand in 2025. Adjusted shareholders’ equity also follows a similar pattern, but consistently reports higher values than the reported equity. The difference between reported and adjusted equity is relatively stable between 2021 and 2023, around US$141,765 thousand, but narrows in 2024 and 2025. The adjustments consistently increase the reported equity position.

Net Income

Reported net income shows a steady increase from US$652,984 thousand in 2021 to US$1,535,761 thousand in 2025. The adjusted net income also increases over this period, reaching US$1,615,244 thousand in 2025. However, the adjusted net income is consistently lower than the reported net income in 2021, 2022, and 2023, but surpasses it in 2024 and 2025. The magnitude of the adjustment decreases over time, starting at US$12,357 thousand in 2021 and becoming an increase of US$79,483 thousand in 2025. This suggests a diminishing negative impact, or a potential reversal, of the adjustments on reported net income.

The consistent adjustments across all three financial statement components – liabilities, equity, and net income – strongly suggest the removal of deferred tax items. The increasing difference in liabilities, coupled with the increasing equity, and the changing impact on net income, indicate a complex interplay of deferred tax assets and liabilities. The trend suggests a potential shift in the company’s tax position over the analyzed period.

The financial metrics demonstrate a consistent pattern between 2021 and 2025. Reported profitability ratios generally exceed their adjusted counterparts, a result of the removal of deferred tax effects. This suggests that deferred taxes are currently contributing positively to reported earnings. Over the five-year period, both reported and adjusted profitability and return ratios exhibit generally increasing trends, although some moderation is observed in the most recent year.

Net Profit Margin

Reported net profit margin increased from 8.65% in 2021 to 13.56% in 2024, before decreasing slightly to 12.88% in 2025. The adjusted net profit margin follows a similar trajectory, rising from 8.49% to 13.18% in 2024 and then to 13.54% in 2025. The difference between reported and adjusted margins remains relatively stable, indicating a consistent impact from deferred taxes.

Financial Leverage

Reported financial leverage decreased from 2.90 in 2021 to 2.52 in 2024, then increased to 3.18 in 2025. The adjusted financial leverage mirrors this trend, moving from 2.73 to 2.49 and then to 3.04. The adjustment for deferred taxes results in a lower leverage ratio, suggesting that deferred tax liabilities are contributing to the reported leverage position.

Return on Equity (ROE)

Reported ROE shows a substantial increase from 28.42% in 2021 to 54.26% in 2025. The adjusted ROE also increases, from 26.26% to 54.64% over the same period. The gap between reported and adjusted ROE remains relatively consistent, again highlighting the influence of deferred taxes. The most significant increases in both reported and adjusted ROE occur between 2023 and 2025.

Return on Assets (ROA)

Reported ROA increased steadily from 9.81% in 2021 to 17.07% in 2025. The adjusted ROA follows a similar pattern, rising from 9.63% to 17.96%. The difference between the reported and adjusted ROA is minimal and consistent, indicating a stable impact from deferred taxes on asset utilization efficiency. The rate of increase appears to slow slightly in 2025.

In summary, the removal of deferred tax effects results in slightly lower profitability and return ratios, and a lower financial leverage ratio. The trends observed in both the reported and adjusted ratios are largely consistent, suggesting that the underlying business performance is the primary driver of the observed changes. The impact of deferred taxes appears to be relatively stable over the analyzed period.

The period under review demonstrates consistent growth in both reported and adjusted net income. However, a comparison of the reported and adjusted net profit margins reveals a consistent, though relatively small, difference throughout the observed timeframe. The analysis focuses on the trends exhibited by these margins.

Reported Net Profit Margin

The reported net profit margin increased steadily from 8.65% in 2021 to a peak of 13.56% in 2024. A slight decrease to 12.88% is observed in 2025, though the margin remains significantly higher than in earlier years. This indicates improving profitability based on reported figures.

Adjusted Net Profit Margin

The adjusted net profit margin mirrors the trend of the reported margin, increasing from 8.49% in 2021 to 13.54% in 2025. The increase is consistent year-over-year, with a similar peak in 2024 at 13.18% before exceeding it in the final year. The adjusted margin consistently trails the reported margin, but the difference remains relatively stable.

Margin Differential

The difference between the reported and adjusted net profit margins is approximately 0.16% to 0.4% across the period. This suggests that the adjustments made to net income consistently result in a slightly lower profitability figure. The consistent nature of this difference implies that the adjustments relate to recurring items.

Overall, both net profit margins demonstrate a positive trajectory, indicating strengthening financial performance. The consistent difference between the reported and adjusted margins warrants further investigation into the nature of the adjustments to understand their impact on the overall profitability picture.

The period under review demonstrates fluctuations in both reported and adjusted shareholders’ equity, alongside corresponding changes in financial leverage ratios. A general observation is that adjusted financial leverage consistently remains lower than reported financial leverage across all years presented.

Shareholders’ Equity

Reported shareholders’ equity increased from 2021 to 2023, reaching a peak of US$3,062,207 thousand. A further increase was observed in 2024 to US$3,655,546 thousand, before declining in 2025 to US$2,830,607 thousand. Adjusted shareholders’ equity mirrors this trend, exhibiting growth through 2024 and a subsequent decrease in 2025, remaining consistently above reported equity.

Reported Financial Leverage

Reported financial leverage initially stood at 2.90 in 2021 and increased slightly to 2.93 in 2022. A downward trend was then observed, decreasing to 2.63 in 2023 and 2.52 in 2024. However, leverage increased notably in 2025, reaching 3.18. This suggests a changing capital structure or debt profile impacting the reported leverage calculation.

Adjusted Financial Leverage

Adjusted financial leverage followed a similar pattern to the reported ratio, beginning at 2.73 in 2021 and rising to 2.81 in 2022. It then decreased to 2.55 in 2023 and 2.49 in 2024, indicating a reduction in financial risk based on the adjusted equity calculation. Similar to the reported leverage, adjusted financial leverage increased in 2025, reaching 3.04. The consistent difference between reported and adjusted leverage suggests the adjustments made to shareholders’ equity have a stabilizing effect on the leverage ratio.

The increase in both reported and adjusted financial leverage in 2025 warrants further investigation to determine the underlying causes, such as increased debt or a decrease in assets. The consistent difference between the two leverage ratios highlights the importance of understanding the nature of the adjustments made to shareholders’ equity and their impact on the overall financial risk profile.

Over the five-year period, both reported and adjusted net income demonstrated a generally increasing trend. Reported net income rose from US$652,984 thousand in 2021 to US$1,534,110 thousand in 2024, with a slight increase to US$1,535,761 thousand in 2025. Adjusted net income followed a similar pattern, increasing from US$640,627 thousand in 2021 to US$1,491,173 thousand in 2024, and then to US$1,615,244 thousand in 2025. Shareholders’ equity, both reported and adjusted, also generally increased during this period, although reported shareholders’ equity decreased in 2025.

Reported Return on Equity (ROE)

Reported ROE exhibited an upward trend, increasing from 28.42% in 2021 to 41.97% in 2024. This trend continued into 2025, with a significant increase to 54.26%. The increase suggests improving profitability relative to shareholders’ equity.

Adjusted Return on Equity (ROE)

Adjusted ROE mirrored the trend of reported ROE, rising from 26.26% in 2021 to 40.28% in 2024, and then to 54.64% in 2025. The adjusted ROE values are consistently lower than the reported ROE values across all years, indicating that adjustments to net income and shareholders’ equity have a dampening effect on the calculated return. The magnitude of the difference between reported and adjusted ROE remained relatively stable throughout the period.

Shareholders’ Equity Trends

Reported shareholders’ equity increased from US$2,297,374 thousand in 2021 to US$3,655,546 thousand in 2024, before decreasing to US$2,830,607 thousand in 2025. Adjusted shareholders’ equity followed a similar pattern, increasing from US$2,439,139 thousand in 2021 to US$3,701,754 thousand in 2024, and then decreasing to US$2,956,281 thousand in 2025. The decrease in both reported and adjusted shareholders’ equity in 2025 warrants further investigation.

The consistent increase in both reported and adjusted ROE, particularly in the later years of the period, suggests improved efficiency in generating profits from shareholders’ investments. However, the decrease in shareholders’ equity in 2025, despite continued net income growth, should be examined to understand the underlying factors contributing to this change.

The period under review demonstrates consistent growth in both reported and adjusted net income. This growth is mirrored in the reported and adjusted return on assets (ROA) figures. However, a consistent, though relatively small, difference exists between the reported and adjusted ROA values each year.

Reported Net Income & ROA

Reported net income increased steadily from US$652,984 thousand in 2021 to US$1,534,110 thousand in 2024, with a slight increase to US$1,535,761 thousand in 2025. Correspondingly, reported ROA exhibited a consistent upward trend, rising from 9.81% in 2021 to 16.67% in 2024, and further increasing to 17.07% in 2025. This indicates improving profitability relative to total assets.

Adjusted Net Income & ROA

Adjusted net income also showed consistent growth, moving from US$640,627 thousand in 2021 to US$1,615,244 thousand in 2025. The adjusted ROA followed a similar trajectory, increasing from 9.63% in 2021 to 16.20% in 2024, and reaching 17.96% in 2025. The adjusted ROA consistently exceeded the reported ROA in 2021, 2024 and 2025.

ROA Discrepancy

A consistent difference is observed between the reported and adjusted ROA values. The adjusted ROA is lower than the reported ROA in 2022 and 2023, but higher in 2021, 2024 and 2025. The magnitude of this difference remains relatively stable, generally ranging between 0.1 and 0.9 percentage points. This suggests that adjustments to net income, likely related to specific tax treatments or non-recurring items, have a consistent, albeit modest, impact on the calculated ROA.

Overall Trend

The overall trend indicates strengthening financial performance, as evidenced by the increasing net income and ROA figures. The consistent difference between reported and adjusted ROA suggests the presence of recurring adjustments that warrant further investigation to understand their underlying nature and impact on the company’s financial picture.