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EPISODE 270

Chipotle CFO Jack Hartung: Integrity is on the Menu, But the Guac May Be Extra

55 minutes · November 15, 2021

Jack Hartung, CFO of Chipotle Mexican Grill (NYSE: CMG), explains how Chipotle leverages its mission of providing fresh food with integrity to create value on the balance sheet. The result? Exceeding the expectations of its employees, partners, and customers. Jack and CEO Brian Niccol have the company poised to win in the digital economy through investment in innovations, from Chipotlanes to robots. Jack also talks about the state of the restaurant industry and using a brand to cultivate a better world.

announcer:

From the library of the New York Stock Exchange at the corner of Wall and Broad streets in New York City, you're Inside the ICE House, our podcast from Intercontinental Exchange, on markets, leadership, and vision and global business. The dream drivers that have made the NYSE and indispensable institution of global growth for over 225 years. Each week, we feature stories of those who hatch plans, create jobs, and harness the engine of capitalism. Right here, right now at the NYSE at ICE's exchanges and clearinghouses around the world. And now welcome, Inside the ICE House, here's your host, Josh King of Intercontinental Exchange.

Josh King:

Those who wait to see which way the wind is blowing will be unfurling their sail while the competition is crossing the finish line, so said Muriel Siebert a woman who made her career of being first at many things, including the first woman to become a member of the New York Stock Exchange. I doubt that Muriel was investing in Bitcoin when she passed away in 2013, the race isn't over yet, but there's definitely wind in the sails of companies like the newly independent Bakkt, that's NYSE ticker symbol BKKT, and it's partners like MasterCard, that's ticker symbol MC, which are bringing sales that use digital currencies to the general public.

Josh King:

It was just three years ago that we heard from Jeff Sprecher, Kelly Loeffler and others about the launch of Bakkt. The company has evolved over that time. Users can now convert, among other things, hotel and airline and restaurant points into crypto. And its infrastructure allows users to store their digital assets in a single wallet, move them around, and spend them as they please through the Bakkt app. Bakkt's sometimes serpentine journey has allowed its leadership team to serve as connectors between the pipes of traditional finance and the digital leaders of crypto.

Josh King:

According to CNBC, MasterCard will be the first major payments to technology company to allow its network of millions of merchants to integrate crypto into their day to day operations. That isn't to say that crypto hasn't already made a move into everyday commerce. For example, earlier this year, Chipotle celebrated national burrito day by running a crypto currency giveaway to consumers that offered customers a chance to play burritos or Bitcoin. Guests would guess a six digit code to either win a free burrito or up to $25,000 in Bitcoin.

Josh King:

Our guests today Chipotle Mexican Grill CFO, Jack Hartung, signed off on that giveaway worth $200,000, and joins us to talk about how innovation and everything from finance to food are impacting his company. Our conversation with Jack on how Chipotle is preparing for the digital economy, the state of the restaurant industry, and using a brand to cultivate a better world is coming up right after this.

Speaker 3:

As the Gold Auction, and also the LBMA Gold Price, it's the world's price for gold, particularly gold, which is delivered in London. Four banks would travel to a room next to the Bank of England twice a day in order to run an auction verbally. And it worked like that for about a 100 years. When some of these firms moved out to Canary Wharf, they decided actually it was too much to be sending people to the room. So they moved it to a phone call to buy and sell and establishing a price.

Speaker 3:

IBA took over the auction in 2015, and we moved it to an electronic auction on the WebICE platform. So it's fully audited, it's a proper electronic liquidity window, a market. Buyers and sellers can come together. It's still run as an auction in rounds of 30 seconds. And the final price we use as the benchmark for the entire gold market. It's been extremely successful, since we took over. Volumes have increased, they've pretty much more than doubled. And we've actually nearly tripled the number of participants that we have as well. And we publish the data transparently on our website, so anyone can come and see what actually happened in the auction.

Speaker 3:

And we introduced a centrally cleared model with ICE as the central counterparty, because that makes it much easier for new firms to join. As up to 79% of the volume has gone cleared. This is kind of the pattern that ICE has seen through how different markets have developed, but normally that takes 10 years, whereas, actually, it's taken 10 weeks in the auction.

Josh King:

Our guest today, Jack Hartung, is chief financial officer of Chipotle Mexican Grill. That's NYSE ticker symbol, CMG. He joined Chipotle in 2002, after spending 18 years at McDonald's, where he held various management positions. Welcome Jack Inside the ICE House.

Jack Hartung:

Hey, Josh. Great to be with you.

Josh King:

Crypto and fast casual tend to attract a very similar college educated, middle class demographic. So from a marketing perspective, crypto could be seen as an aspirational competitor with your business. Do you view your wallet competition as other fast casual restaurants? Or do you take a more holistic view?

Jack Hartung:

We take a more holistic view. It's really more about dining. When you think about your next meal, you could go to the grocery store, you could reach into your refrigerator, and you can go to just a countless number of restaurants, from traditional fast foods through the drive-through to a fine dining restaurant. And so we look at the whole dining experience that customers are looking for, and keep in mind, Josh, we were started by fine dining chef. We weren't started by somebody that came out of MBA school, and was looking to create a Chipotle chain. We were started by somebody that really wanted to open up one restaurant. And the hope was that one restaurant would generate enough cash to fund a full service, fine dining restaurant.

Jack Hartung:

That kind of approach to food, still exists today. We don't think of the Chipotle meal, the burrito, as fast fuel. It is for asked and it is tasty and it is very nutritious, but we think of it as a dining experience. And so we still do hours and hours of prep before we open up at around 11 o'clock in the morning, which is what would happen in a fine dining restaurant. We still cook all our food pretty much to order. Now, it doesn't mean that when you order a steak, we put the steak on. But we're cooking constantly, so that when you order a steak or a chicken burrito, it was a matter of minutes, maybe several minutes, maybe 10 minutes or so that that food was cooked and then brought to you.

Josh King:

Give us that origin story of the lone chef with the vision. How did Chipotle begin?

Jack Hartung:

Yeah. Steve Ells was a 26-year-old kid, I'm going to call him. Yes, he was a young adult, but he was working at a fine dining restaurant in San Francisco called Stars. At that time, one of the best restaurants in the country, in the early '90s. And they would work very long hours and he would often stop at these taquerias on the way home. And one day it just kind of hit him. He goes, "Wow, this is a great way to serve food. It's easy. It's fast. The meal is made. The burritos are rolled right in front of you. But what if I took my fine dining experience, the prep, using whole fresh ingredients, rather than process ingredients? What if I grilled the meats on a regular basis, right in front of the customers? What would would that experience look like?"

Jack Hartung:

And it was kind of this idea of, let's take fast food, combine it with the culinary of fine dining, and see what we come up with. And that was his vision. And ended up being one very small restaurant, 850 foot restaurant near Denver University. That again, he thought that he would open that, run that for three, four years or so, and that would fund his fine dining restaurant. Well, it didn't take long for him to realize that Chipotle had much, much, much more potential than just a funding mechanism for his fine dining restaurant. So he said, :Let's open another one." Well, that one did even better than the first. And then that led to another and another, before he knew it, Steve figured out, "Wow, I could really feed people. I can have a bigger impact on food culture in this country by bringing this kind of dining, sourcing wholesome, sustainably raising premiums, doing real cooking, but do it in a fast and affordable environment."

Jack Hartung:

And that's really how it took off. And in the early days, Steve would tell you the story is that, people would tell him, "You're doing everything wrong. That's not how you a restaurant. You can't do all that prep in the restaurant. You can't do all the grilling right in front of the customers. You can't take cilantro... Cilantro is something you shake out of a jar." No, that's not the way Steve did it. He would take the cilantro stems and pull the cilantro off the stems, and finally chop, which is what you would do in a fine dining restaurant. So it didn't take him to realize, "My God, I can have a much bigger impact on food culture in this country by bringing boldly to more and more people."

Jack Hartung:

In the early days, Josh, the mantra was, "Just because it's fast, doesn't mean it has to be a typical, fast food experience." And while the words are changed today, we want to cultivate a better world. It's still around this idea that we can bring better food to the masses.

Josh King:

Speaking of wholesome restaurants strategically located near college campuses, I read an interview that you did a couple years ago with your alma mater, where you mentioned wanting to visit the Chipotle right off the Illinois State campus. Did you ever get a chance to make that visit?

Jack Hartung:

You know what? I didn't. I was in such a hurry then and I haven't been back there yet. So I guess you're reminding me, I have to make a trip back there.

Josh King:

I mean, what brought you originally to Normal? And what about that college made it not just the right place for you and your wife, who I think you met there, but also I believe your children went there as well?

Jack Hartung:

When I was a kid, when I was 18 years old and deciding what colleges go to, my God, I didn't know what I was talking about, Josh. And I had friends that were going to Illinois State. They told me where they were going to stay, what dorm they were staying at. I talked to my older brother, who was going to the University of Illinois, and he was studying accounting. And so I kind of put those two experiences together. I wanted to go where my friends were going, Illinois State. I wanted to study what my older brother was studying, because he told me what a great career I could have in accounting. So I went to Illinois State to study accounting. I kind of have thought that I might transfer to U of I, because my brother was in my ear saying, "U of I's got a great accounting program and you have to move here."

Jack Hartung:

As soon as I got to Illinois State, though, I realized they had a great business program, a great accounting program. Of course, I did meet my wife there, and we now have five kids and we've got grandkids. And so it's been a great a journey on a personal basis. Illinois State just was very welcoming. It was very down to earth. And when I realized the passing rate for the CPA was as high or higher at Illinois State, as it was to U of I, I'm like, "I'm staying here. I don't need to go there after all." And I still have lifelong friends that I've met in college, and of course my wife and family started there as well.

Josh King:

Now, I don't know if your brother continued on the big accounting track, but after your graduation, you started that path. You got your CPA, you joined one of the big eight firms. What made you decide to go to work with McDonald's, which is our NYSE ticket symbol, MCD? And how did your career develop from there?

Jack Hartung:

Yeah. Again, I look back and I think about how things just kind of happen somewhat randomly, but I also think that it ends up being fate as well. McDonald's was not too far from my home. So I was aware that they had the headquarters right there in Oak Brook, so it was maybe 20 minutes from my home. I knew I was not going to have a career in public accounting. I knew that wasn't for me. I wanted to, at some point, get into helping to run a business. I wanted get my hands onto a business. I really loved finance. And even though I got my degree in accounting, I also got an undergrad in economics, and then I got an MBA. So I really felt like my calling was going to be to get into the business, with my hands on, at some point.

Jack Hartung:

And, again, I had some friends. I mean, you're going to think, I just follow my friends everywhere, but I had some friends that had joined McDonald's, and the thing that appealed to me the most was, McDonald's had this kind of open job search within the company, where you could start into a traditional finance role, but when there are openings, for example, to support the company operated part of the business or the franchise part or international part, they would post the job, and it was an internal job fair, if you will, virtual job fair, even though it was on paper at the time. I thought that was amazing, because I love to learn. I still love to learn. I still, even though I've been in business for such a long time, I'm learning something every single day. And I felt like, "Wow, this is a successful, well-known global business. And if they will give me the opportunity to learn about different parts of the business, how exciting could that be?"

Josh King:

So Steve is ply away at his vision of what he is doing with cilantro and making a run of it. Things are doing well in Denver and the vision is beginning to expand. And then this company that Jack's at, McDonald's, becomes a major investor in Chipotle. Why did McDonald's make that investment? And how were you introduced to the idea?

Jack Hartung:

It was in the late '90s, so Chipotle had 11, 12 restaurants at that time. And McDonald's, at that time, felt the growth of the McDonald's hamburger business is starting to flatten out, what are we going to do next? And so the idea was, let's take a look and see if McDonald's could expand into other cuisines. It just so happens that Chipotle actually came calling on McDonald's. Chipotle had been raising money every year or every two years to fund its growth. Steve hated that. I mean, Steve was a chef, and he wanted to be in a restaurant.

Jack Hartung:

But every year or year and a half or so, he'd have to spend time in front of finance folks, which he wasn't that comfortable with. He didn't really like talking about the finances. He really wanted to just create and serve delicious food. So one of his advisors said, "Steve, why don't you look for a strategic partner? Somebody like a McDonald's," or at the time it was Yum! which would've been KFC and Taco Bell and Kentucky Fried Chicken. So he actually was knocking on doors. One of the doors he knocked on was McDonald's. McDonald's was at the time thinking, "Gee, what are we going to do next?" And so they took a look.

Jack Hartung:

And it's funny, you hear the stories, I wasn't there then, but the folks that were with Chipotle back then talked about this big limo pulling up in front of their little restaurant with a bunch of suits coming out, ordering everything on the menu, and doing all this tasting. And it's like, "What the heck's going on here." And later that ended up being, that was the McDonald's execs that came to take a look. They did make an investment, and a few years after McDonald's made the investment in '98. My first experience with Steve and Chipotle was in 2000, just a couple years after.

Josh King:

What I've read, Jack, is that it's 2002, and when you're thinking about joining the company, you were initially hesitant to take the job and relocate your family. What made you decide to jump in?

Jack Hartung:

My first meeting with Steve, and I remember it like it happened yesterday, was in 2000, and he took me to the restaurant. So we didn't spend time looking through reports or financials or let's talk about financing or anything like that. He took me to the restaurant, and he went through the line and he talked about every single ingredient. He talked about the rice and he talked about exactly what ingredients went into the rice, and exactly how it should taste. So we didn't go through the line and get a burrito. We went through and tasted the rice. And he said, "Jack, you should tell you taste a little bit of lime. You should taste the cilantro. There's a little bit of salt in there, but you shouldn't taste the salt that should just bring out the subtle flavor of the rice, and it shouldn't be too sticky. So it should be light and fluffy."

Jack Hartung:

He'd go on to the fajitas, and then go on to the chicken, the guacamole. So every ingredient he went through, and had this very discerning, very detailed vision of what each ingredient should taste like. And if we hit the mark on every single ingredient, the burrito that you craft with all those ingredients would be extraordinary, and he was right. And at that time, I mean, I had chills up my spine, because I'm like, "I've never seen anybody talk about food this way, or have a vision about how people should eat." So it was at that time, I was very interested, and I wanted do all I could do to help Chipotle. It was a few years later that Steve felt we are going on to the next level of growth, and he needed a CFO. And so he approached me, and immediately I'm like, "I really want to be a part of this."

Jack Hartung:

Because Chipotle, I knew, was an amazing company in terms of thinking about food, how you source food, using a sustainable approach, how you really cook in front of the customer, do real cooking. And I wanted to be part of that. And I thought I could bring my business skills to help Chipotle at that point. But I have a large family. I've got five kids, and we all took a trip out to Denver. We all took a look. I promised my family that I would not force them to move. So it was a bit of a democracy. Well, the bottom line is with seven people, I lost the vote. I think the vote was four to three, so I stuck to my promise. I said, "Okay guys, I'm not going to move." But I was disappointed about it.

Jack Hartung:

Steve said some really amazing words at that time. Very simple but amazing words. He said, "Jack, why don't you commute?" And I'm like, "You're nuts, Steve. Commuting is something you drive to and from, and it's a 30 or 45 minute commute." He goes, "Jack, try it for a year. Just try it for a year. My dad did it," and he told me how it worked for his dad. He said, "You can talk to my dad," and I did. The magic words were, "Try it for a year." It's like, "Well, wait a minute. This is a crazy idea, but I could do almost anything for a year."

Jack Hartung:

So it was hard. It was really was hard to get on an airplane every single week and leave my family. But after a year it's like, okay, it was hard, but let's try another year. And then it was another year. After a few years, I stopped count the years, and thank God, I mean, my wife is amazing. She's done a great job of raising my kids. If I needed to be home for a graduation or a ballgame or whatever, I would arrange my travel schedule so I could make that. So Steve was very accommodating. My wife was amazing. But the magic words were, "Just try this for a year." And that led to this journey that I've been on.

Jack Hartung:

And I mean, I just couldn't say enough about how lucky I am to be on a journey where you start with a small private company, founder-led, you get to go through taking the company public/ and we've had bumps along the way, but I think every challenge a company or an individual goes through, I think it's a learning experience. And I think, if you take every challenge as a learning experience, even though they're real tough challenges, you become a better person. And I think you become a better company.

Josh King:

So you try it for the first year. You do it again for the second year. And then suddenly there's four years between the time that you were named CFO, and the time that finally there's a initial public offering here at the New York Stock Exchange in 2006. Why was that the right time to go public?

Jack Hartung:

I would say what's mutual, but keep in mind, the 90% parent, McDonald's had a leadership change at that point. And they realized, rather than distracting themselves and more importantly, distracting franchisees from their core business, which was their golden goose, their bread and butter, they really needed to shed, and by this point they had had a number of different businesses, in pizza and coffee and sandwiches, and the CEO at that time decided we've got to get back to our core.

Jack Hartung:

At the same time, we were at a point where, financially, we were knocking on the door of being self-sufficient. And so McDonald's needed to get back to its core. They came to us and said, "We really think we need to do a spinoff here." We felt we were ready. And frankly, from a culture standpoint, while McDonald's was really good about being hands off and allowing us to still be Chipotle and still do all the things that made Chipotle special at the very first restaurant, it was time for us to split off.

Jack Hartung:

It was a whirlwind of a year to get ready for the IPO. It was a whirlwind of a road tour where you're on the road from six o'clock in the morning till nine o'clock at night. But, again, it was an amazing experience. We learned a lot. I have never spent that much time with Wall Street folks in my life, but it was an amazing experience. And most importantly, folks were really embraced what Chipotle was all about. And it went successful, because we were able to tell the story of really what Chipotle was all about in terms of food. But you combine that with the economic potential, and it was something that Wall Street really embraced.

Josh King:

We know that the stock has traded up about 4,000 times its initial price over the past 15 years, but [countering 00:18:49] what you just said, when you did an oral history for the company, you acknowledged that you hadn't spent much time with anybody on Wall Street, but then you quoted one large investor who said, "Jack it's like Taco Bell, right?" So you had to do some explaining. How did the experience of differentiating yourselves from Taco Bell and any other offering out there help you grow along with the company?

Jack Hartung:

And you I'd forgot that until you brought that up, but that was the road show. And at the time we had 400 restaurants, when we were on the road show to go public in 2006, but they weren't in every single city. And we didn't have very many in a lot of cities. So a lot of our investors, or a lot of the prospective investors that we met on the road show had never been to Chipotle. And that was one very prominent investor who will remain nameless, who basically compared us to Taco Bell. Well, you could just see and feel the hairs on Steve's neck go up. Because remember Steve has this vision of creating a restaurant concept that says, just because it's fast doesn't mean it has to be a typical fast food experience. He wanted to elevate the experience.

Jack Hartung:

Well, it turns out that that investor was very astute. They made the investment and we spent some great time where that person actually joined us in restaurants, where we took him behind the scenes. We showed him, and this was after he made the investment, where we showed him how our ingredients come in as whole fresh ingredients. We showed him the crews actually prepping. And so he basically became closely connected, not just the management team, but Chipotle as well, but it was a interesting start, for sure.

Josh King:

You barely had time to get the quarterly cadence of being a public company going as CFO, when the financial crisis hits, 2008, 2009. How did that period test the company and lead to the post-financial crisis climb that we've seen both in the number of stores and the valuation of the business?

Jack Hartung:

We were fortunate at the time, Josh, we had a strong balance sheet even back then, we have one today, and it's kind of just been who I am as as a person. Listen, I get the financial advantage of leverage. I get the idea of borrowing so you can increase your return on capital, but I've always been more conservative where you don't want to risk the farm. And with a young company like Chipotle, at that stage, with significant growth prospects, we had a conservative balance sheet. And so we knew we had a balance sheet back then that we could weather that storm. So, financially, I wasn't really worried about it.

Jack Hartung:

From an internal standpoint, in terms of making decisions. There were a lot of important decisions we had to make to try to navigate through and make sure we could continue you to grow our sales or to invite customers back. The thing that I was most proud of is, because we had the strong balance sheet, we never talked about, what can we do to reduce our food cost? We never talked about, what can we do to maybe cut labor at the restaurant, so that we could reduce our labor cost?

Jack Hartung:

Now, it doesn't mean we're not looking for efficiencies, but we stayed true to what Chipotle was all about. And that was, what can we do to invest more into the quality of our food? How can we increase the amount of naturally raised meats and locally grown produce, even while others were trying to, basically, cut back on costs? We wanted to invest more in our people back at that time, because we knew, as a company owned, and this is one of the unique things about Chipotle, we're still to this day, a 100% company owned. The restaurant industry, especially the chain industry is mostly franchised, so you're really using somebody else's capital and somebody else's employees. That was not the model, and that wasn't the vision that we wanted to pursue at that point.

Jack Hartung:

So, listen, it was tough times. It was scary times. I do remember, Josh, so we had our cash invested in very, very safe places, but there was a point where we were actually earning negative interests. We had to pay banks to hold onto our money and they didn't teach me that in finance classes back in college. So that was a little learning experience for us. But we navigated that through and I think we navigated it through because we stayed true to our purpose, stayed true to our values, and we had a strong financial position where we weren't kind of teetering, and we had to make some short-term, tough decisions.

Josh King:

Jack, just because I'm a political junkie, I want to make a quick odd digression to one of your locations in Maumee,, Ohio 2015, this woman parks in the parking lot puts on sunglasses, walks in and orders a burrito bowl. Turns out she is the former first lady and Senator from New York about to go on a road trip to Iowa to announce her presidential campaign. It's Hillary Clinton. When word that Mrs. Clinton had come into a Chipotle on her road trip, how did that reverberate to the business?

Jack Hartung:

Well, that was very exciting. In fact, we immediately were getting pictures, because people were taking pictures in the restaurant and sending them to us. She was kind enough to take pictures with our managers, with our crew, and that was a big deal. And even back then, that was still early day. A lot of people didn't know who Chipotle was at that time. It gets back to your original question about how do we look at where our competitors are.

Jack Hartung:

Hillary could eat at any restaurant, at any time. She could have private chefs. So she has the culinary world at her fingertips. She chose to come to Chipotle. So it was very humbling. We were very proud of it. And, again, which is very exciting, and most exciting for us, was that our crews and our managers, the ones that are at the front line that are doing the hard work, serving our customers every single day, really got to experience that excitement. It was very cool.

Josh King:

I mean, as we head into the break, some future Hillary Clinton on a road trip wanted to go to Chipotle, may not have to put on the sunglasses and come to the store. I want to discuss a practice that you began in recent years that I understand was initially pretty controversial across the company. At the end of this quarter, nearly 10% of Chipotle now have drive-throughs. In the company's third quarter earnings call, you announced that 75% of new locations are going to have what you've termed Chipotlanes. What's been the response to an impact of adding drive-through service, to both new and existing locations?

Jack Hartung:

I will tell you, over the years, the discussion of drive-through really, really evolved. 10 years ago, for example, 15 years ago, it was a firm, no. The drive-through really signals that you are traditional fast food. And, again, our mantra was, we wanted to elevate fast food, and we thought that that queue might send a signal to customers that there's not real cooking going on in the restaurant. We also 10 or 15 years ago, we were still bringing a lot of new customers into the restaurant. And we wanted them to come in and see the open kitchen, and see that we were doing real cooking right in front of you.

Jack Hartung:

Well, a few years ago, as we were talking about our digital business, we talked about the convenience. How could we take convenience to another level? We felt like we could create what we referred to as the digital drive-through of the future. So it's not a drive-through, because there's no speaker, there's no ordering when you come onto the lot. And we, as a management team, talked about what is ordering at a Chipotle restaurant or other fast casual restaurant, what it's going to be like in five years from now? Can you envision the kids of today wanting to drive up and order through a speaker and wait for their food? Or is everything, is all commerce going to be through their phone?

Jack Hartung:

Well, the pandemic certainly has accelerated that, but we thought, okay, we're going to skip over the traditional drive-through with a speaker. We're going to have a digital drive-through, we called it Chipotlane. It was a hit from the beginning, Josh. And so we opened two or three or four of them and watched them and they were an instant hit. There was a little bit of an adoption or a learning curve if you will, customers would drive on a lot, and they would look for the speaker. So we would have to position somebody on the crew, in the lot, and explain how it worked.

Jack Hartung:

But I would say, after the first week or week and a half, customers got it, the business immediately was a major part of the business. Even before the pandemic, it ended up being about half of our business. During the pandemic, digital ended up being 60, 70% in Chipotlanes, most of that with the order head and drive up. And so our customers have responded from a convenience standpoint, super convenient. It's super high value.

Jack Hartung:

And the beauty of it is, you don't have to drive up, and wait in line for other people and food. There might be a car or two, but we tell you when your food's going to be ready. So if you want your food at 12 o'clock, we'll have it for you at 12 o'clock. If you want it at 12:10, it'll be 12:10. And so there's kind of an agreement that we have in terms of what works for you and we'll have it ready for you.

Josh King:

After the break, Jack Hartung, CFO of Chipotle Mexican Grill, and I discussed the future of the company from the sci-fi to the low-fi ways chipotle is preparing to grow and continue to meet its customer food needs. That conversation is coming up right after this.

Speaker 5:

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Josh King:

Welcome back. Before the break, Jack Hartung, CFO of Chipotle Mexican Grill, and I were discussing his career and the growth of the company from its IPO to the present. So take me back to around Christmas two years ago, December 2019, shares trading around their then all time high of about $860 three months later, they've sunk 20% to around 654, on March 1st, and we know what really that coincided with. Take us into the C-suite in Denver, as the pandemic became pervasive. Existential crisis or unprecedented opportunity, if you happen to play your cards right?

Jack Hartung:

Yeah. Yeah. Listen, really, really great question. I'll tell you the early days, if you could be fly on the wall with our management team, one of the first things we did, like Brian and I, our CEO, Brian Niccol, we talked about, "Okay, we know we've got a strong balance sheet, but let's do a cash burn analysis." Which, by the way, I've never had to do, even when we were a private company, I never had to do a cash burn analysis. Meaning, how long will our cash last? We did some quick modeling and realized, "Okay, we're in really good shape." We had about a billion dollars in cash. And if we said, for example, "In the worst case scenario, the stores closed and we have zero sales, how long can we last?"

Jack Hartung:

So that gave us the confidence that, okay, we committed at that point to make sure we made decisions during the pandemic. And we didn't know if it was going to be a month, three months, two months, none of us guess it would be a year and a half or two years, or whatever it ends up being. We are going to make investments in our business and in our people and in our food that is going to allow us to come out of the pandemic stronger than we went in.

Jack Hartung:

And so we doubled down on investments in our people, for example, we wanted to make sure that they were safe and if they were exposed or they were nervous about working at Chipotle, because they might have been exposed, we paid them anyway. So whatever hours they were supposed to work, we paid them. We paid discretionary bonuses to our managers, to our crews, not based on results, because results were totally in the tank at that point, as people were not getting out and about anymore, but we want to make sure that our teams knew that we cared about them. We supported them. We cared about their safety, and we wanted to make sure they also financially were able to pay their bills.

Jack Hartung:

We also made the double down on investments in digital. We had already been making significant investments in digital over the years. And in fact, if we hadn't made those investments, Josh, we would not have been able to navigate through the pandemic as well as we did. And we also made sure that throughout that we were continuing to buy the very best food we could. Let's make sure we raise our standards, not lower them. Let's make sure that we're still cooking and serving delicious food. So all the things that make Chipotle special, our food, our people, and now the convenience of digital, we doubled down.

Jack Hartung:

We also said, "We're not slowing down at openings. We know that the sales environment is very rough, but let's continue to make sure our development team is finding great sites." And so all the things that we knew would lead to a better, stronger brand and a better, stronger company in the future, we made those investments and we made them with confidence. And would I have guessed, based on where the stock price was that we'd be like at double, during a pandemic? Absolutely not.

Jack Hartung:

But I think the strength of our digital system, the fact that the digital sales, the digital experience is very sticky, we felt, and it's proving out this way, that the customers that tried digital for the first time because of the pandemic, that that would be a sticky experience, that they would come back, and that we would also get our dining room business back as well. And so today we're looking at sales volumes that are the highest they've ever been. We're looking at margins that are the highest that we've had in like five years. And we're still going through the pandemic. And yet, these business results all are the outcome of the longer term investments that we made, we're starting to see those pay off.

Josh King:

Take us into that prep for the fourth quarter 2019 call, the first quarter 2020 call. Analysts are sort of having to recalibrate the questions they ask for you, scratching their heads about what they should be worried about. Are they getting it at that point? Or you have to bring them on this journey to say, "Imagine these stores closed, with our cash burn analysis for the next couple months, we're still going to be okay."

Jack Hartung:

Yeah. The questions really changed at that point, Josh. It wasn't about the margins of the last quarter. Everyone was looking ahead, everyone was worried about how this is going to play out. So we did, at a high level, share with them what our financial position would look like. And we shared things a like, what if our stores closed, could we keep our employees? Could we keep the restaurants going? Like for example, would you stay open, even if almost no customers would come in? We shared with them our ability to do that.

Jack Hartung:

So early on, Wall Street understood that we were going to financially be able to withstand this better than anybody. Now, what they didn't, early on, realize that, not a only would we withstand it... Companies that had a lot of debt, companies that have franchisees who were under a lot of stress, those were very, very difficult days. And listen, we want to win in this industry, but we don't want other restaurants to be put out of business. We don't want other employees to be put out of business. And so that was a very, very tough time.

Jack Hartung:

But it was clear to Wall Street, at that time, based on discussions we had, that we had a financial wherewithal to withstand this. Now it wasn't until a few months later, when our digital business really took off and it got up as high as 70% at one point, that's when they were blown away by, "Oh my God, not only is Chipotle going to be financially able to withstand this crisis, they're going to thrive in it." They had no idea that our digital system, which accounted for about 18 to 20% of sales just before the pandemic started, shot up to 70%. They said, "Oh my God," they had no idea that we had the ability or the capacity to make that much food, to serve that much food on the digital system. And that's when I think the appreciation for, not just through the pandemic, but after the pandemic, how powerful our business model would be.

Josh King:

Your circumstances, we've talked about earlier, were very different from other chains, because you're a 100% company owned. You're not dealing with the exigencies of franchisees. You're also kind of looking across your store for footprint, the 50 states, and the other places that you are, and saying, "Well, some states are progressing better and some states aren't." What's your sort of calculus about your reopening? Did you reopen across the board?

Jack Hartung:

We had a task force, and in the early days, we met every single day. And then over time we met on a couple times a week, and then eventually it was once a week. But one of the challenges was. We had to monitor all the local jurisdictions. So there were state mandates or state jurisdictions, and then local as well. So our team did a great job of making sure we complied in every single way. So we really followed the mandates. And so, we know that in the Southeast and the Southwest, they were opening up sooner, even the clamp down was not as severe there. Is being open or not open wouldn't necessarily have an impact on consumer demand, or consumer, whether they wanted to come into the restaurant. It's more about, how confident are they? What we needed to do was make sure that we had enough staff at that time, because we did have some folks that were uncomfortable working.

Jack Hartung:

We made sure everyone's jobs were preserved. If they decided they didn't want to work, we would pay them, like I meant mention before, if they may have been exposed. If they decided they wanted to a leave of absence, we allowed that. And even if they weren't getting their hours or had to leave of absence, we allowed them to continue their benefits such as education benefits, things like that.

Jack Hartung:

But we really did it based on, we allowed the customer to decide how comfortable that they were coming into our restaurants, and we staffed accordingly. For some of the market, it took a much longer time, but we basically tailored our financial support, tailored our staffing, and tailored our, how we're going to run the business, based on consumers were responding and based on the local mandates that we needed to comply with.

Josh King:

As we begin to move forward, Jack, innovation is a huge part of the Chipotle culture. Earlier this year, you announced that you'd made some investments in Nuro, which is an autonomous vehicle that one day could deliver a lot of burrito bowls to guests, wherever they are. Take us inside that room where the executive team meets and thinks about that robots might be the next place to invest. As CFO, are you on the lookout for investment opportunities like this? Or did someone else come to internally with that idea?

Jack Hartung:

Yeah. It came to us, but I'll say, we have our toe in the water, meaning, we put the word out there. We've got a relationship with a lot of bankers. And so we put the word out there that we're interested in interesting opportunities. An interesting opportunity can span another cuisine, but it also can span technology that could transform the industry. And so it really was brought to us, but a lot of stuff is brought to us, Josh, and a lot of it's, you cycle through it. And it's like, "That's interesting, but that's not really for us."

Jack Hartung:

When Nuro came about, and when you look at how the delivery companies, the DoorDashs, the Uber Eats have disrupted the food delivery world, it doesn't take you long to figure out, okay, what might be the next disruption? Now, delivery is a great convenience experience for customers, but it's also expensive, and it also takes margin out of the restaurants. We all read those articles about, it's really hard on the little restaurateurs, in fact, some states are trying to cap the fees. Well, it's expensive to deliver food, too. So the DoorDashs and the Uber Eats need to make money, and so they have to charge the fees.

Jack Hartung:

Well, Nuro could be that kind of next generation, where you have the convenience of delivery at much, much lower cost. So as we dipped our toe in and we met the senior team there, we very impressed with their senior team there. And we did our due diligence, we felt like, these guys have a shot at disrupting this industry. We want to be a leader, not just in food, not just in our people culture that we build, but in technology as well. We've proven that with our digital system, now, what's the next layer?

Jack Hartung:

And so we'll continue to keep our eye out for interesting innovation from a technology standpoint that can help our restaurants run better, to create better convenience for our customers, but we'll always stay a true to this idea that we won't compromise the quality of our food. Like for example, we won't automate our food, do something where robot would prepare food, and then it tastes worse than it does if it's handmade. But we're interested in technology that can create a better experience for our customers, better experience for our crews.

Josh King:

Nuro and robots could still be a couple years off, but digital, which we've been talking about, is allowing you to adjust in real time to these staffing shortages you might find from place to place. Your CTO, Kurt Garner, recently said, and I'm going to quote him here, "When a location is understaffed for a shift, it can turn off its digital orders to focus on in restaurant transactions." How does that process actually work in practice from the customer experience? And do you expect that 40% to grow or settle where it is?

Jack Hartung:

Yeah. It's interesting, we kind of learned along the way. Like during the pandemic, if we had an area of the country that had a staffing shortage, because of exposure, again, people that were uncomfortable working, we did end up closing some dining rooms for some period of time in some restaurants. Well, those sales are gone. There's no way to communicate to a customer that's driving to your restaurant, that that restaurant is closed. You find out when you get out of your car, you walk up to the door, and there's a sign on it.

Jack Hartung:

What we've learned and what we're doing now, if we do have a pocket of restaurants or an individual restaurant, that's that struggling, the first priority's keep that restaurant open. Because customers that have made a choice, they've left their Homer office and they drive to your restaurant, we want them to be rewarded for that experience. From a digital standpoint, the way we think about it, Josh, is we've got 2900 restaurants, which means we've got 2900 virtual kitchens.

Jack Hartung:

The industry now has this concept called virtual or ghost kitchen. And, listen, it's growing very, very fast. We've got a DML, which is a second make line in our restaurants. And that's where all the digital orders are made. And it's one of the beauties of why our digital system has been so effective, and the experience has been so good. So our feeling was, if a restaurant is understaffed, you as a customer, when you're ordering at the end of the order, you decide if you want delivery or pickup, if you want delivery, it doesn't matter if the restaurant near your house is closed, will take delivery from the restaurant that's a mile, the opposite way or two miles the opposite way. If you want pickup, when you hit pickup and the restaurant you normally would go to, if that DML is closed right now, we will list for you the five or six or seven restaurants that are nearby.

Jack Hartung:

And because we have 2900 restaurants, in most cases, there might... if there's a Chipotle two miles going to the east, there's probably another one, two miles going to the west. It will tell you very clearly, that's the restaurant you go to, you click on it, and your order will go to that restaurant, and you just drive in the opposite direction. So our feeling was that was a better experience for our customers. We don't think we're losing sales. And it's very, very intuitive. There's not a frustration for a customer that made a decision, and then is penalized for picking the wrong restaurant at the wrong time.

Josh King:

Over the summer, Chipotle got a lot of headlines, really hundreds for your decision to raise prices in order to increase the pay of your associates. And at the time, you said the increase would be really a small change for the company and its customers, but really a big impact on the people that work for you. How has it worked out?

Jack Hartung:

It's worked out really well. Just to put some numbers to that. We raised our starting wages to an average of $15, and that was about a 15% increase. We increased the wage of our salary managers as well. To fund that 15% increase at the crew level, we needed a four percent price increase. We didn't make an extra money, so our margins actually went down because of this, because we're earning the same dollars on, now, a higher sales level. So we just broke even on that. But the idea of taking a four percent price increase, where customers on an eight dollar burrito, have to pay an extra 30 cents, for example, but that will lead to our crews able to earn an average of $15, and then they grow from there.

Jack Hartung:

We're a growing company, and so when you come to Chipotle for a job, you could find that you can actually have a career and grow and become a manager over time. And so it's worked really, really well. Employees that really love Chipotle brand, but were enticed or tempted to go down the road to work at Amazon or Target for a dollar or two more, didn't need to do that, because they can earn the two dollars more with us. And customers, frankly, the anecdotal feedback we got from customers was, "Kudos to you, Chipotle. I'll gladly pay four percent more. I'll pay that extra 30, 40 cents, because you're doing the right things for employees."

Jack Hartung:

And so it's worked well for the business. Our customers, nobody's happy to pay a price increase, but they feel like we did it for the right reason. And we are not making any extra money on it. We're not exploiting this opportunity to make extra money on it. So we think we did the right thing at the right time.

Josh King:

And talking about the things that you're actually paying for. Do you think that that decision along with the company's other employee benefits like debt free college degree program has been a part of the reason why that your stores have not seen the impact of labor shortages that others have across the country?

Jack Hartung:

Yeah. Listen, I think that's right. It's very clear to us that the folks that participate in our debt free degrees, their turnover's three and half times less than somebody who doesn't tap into that. They also are seven times more likely to move up into management ranks as well. And so, that to us makes it clear that, if we invest in them, they'll invest in us, and they will have a successful career with us. I think one of the most exciting things that Chipotle has to offer is a career growth. And I think the debt free degree is an idea of, not only will we invest in your education, your development, but you'll have career opportunities, because we're opening up over 200 restaurants per year, we need more managers. So we'll teach you how to run a restaurant. We'll teach you how to cook in a restaurant. We'll teach how to lead people, and we'll teach you how to run a business.

Jack Hartung:

Within a few years of joining as crew, you could be running a two and a half million dollar business. Within a few years after that, you can move up into even higher levels. And we'll teach you, we'll invest in you. Now, your aspirations have to match your ability, but if you're missing something from an education standpoint that we can help with, with these debt degrees, it's a win-win for both the company and our employees.

Josh King:

So growing the number of customers that you can feed requires all of the manpower that you and I have just been talking about, but it also requires tons of supplies, fresh food, which is so central to your mission of quality, local, and sustainable sourcing. How is the current stress of the global supply chains affecting the company?

Jack Hartung:

Yeah, I have to tell you, Josh, this is the most difficult supply chain environment I've ever seen. Carlos Londono, who heads up our supply team, he and the team have done a fabulous job, because we've had possibilities or threats of disruptions. And the team has done a great job of partnering with our suppliers, and keep in mind, our supply system is very unique. We buy a lot of local, organic, naturally raised. And so it's really not possible if we have a problem with one chicken supplier to just bring in a new one, because we have a very carefully cultivated supply chain with very, very discerning protocols. So we partner with our suppliers, and if they're having a staffing challenge, for example, we'll get on the phone with them.

Jack Hartung:

And in fact, we've had top to top where Brian and I will get on the phone with the senior folks of our suppliers to make sure that, "Is there anything we can? Do you have a labor problem? Have you tried this? Are you paying more wages?" And so we'll problem solve together, because it's in our best interest that we solve any kind of short-term problems.

Jack Hartung:

The most important thing that our suppliers know is that we have growth for them. And so if they're a good partner to us during tough times, there are good times ahead. And so it makes sense for us to partner together. We've had small outages in a restaurant here or a patch there, but we've had no widespread out outages, knock on wood. But it's really because of the strength of our supply system, and I think the round the clock work that our supply chain team is doing. When they see a little evidence of a little stress in the system, they don't wait for it to be a problem. They jump onto it. They're proactive with our suppliers.

Jack Hartung:

I think the other thing that is probably an advantage, we have 52 food ingredients. That's a fraction of what a typical restaurant will have. And our ingredients are things like avocados and steak and chicken. These are very important ingredients, obviously, they're perishable as well. So you have to really nurture these ingredients along the supply chain, so that they arrive in a fresh and delicious condition. But when you do that with a partnership type approach, you can accomplish some amazing things, even during this challenge.

Josh King:

I mean, speaking of those you ingredients, Jack, Chipotle has introduced, now, plant-based meats, cauliflower, rice, and smoke brisket on its menu over the past couple months. When Jack Hartung goes out to lunch, what do you order?

Jack Hartung:

Well, lately it's a brisket. It's amazing. We are getting as much supply as we can, but that will run out sometime in November. Hopefully, we'll get through all of November. When the brisket goes away, I'm a barbacoa guy. Barbacoa is so unique to Chipotle. The first time I had it, almost 20 years ago, I was blown away. And I'm like, "Oh my God, I've not had anything like this ever before." And so I have a hard time veering away from barbacoa.

Josh King:

What's your take on the plant-based future? This is certainly of interest to my kids, both vegetarians.

Jack Hartung:

The plant-based chorizo is fantastic. And as a meat eater, I will eat it and be thinking, "Okay, is this something that I would get on one of my visits to Chipotle? And the answer is, yes, because it doesn't feel like I'm compromising. It doesn't feel like it's something where I could say, "It's pretty good, but I really want to go right back to my barbacoa or my chicken or whatever else I might get." The important thing is this is a trend that's happening in this country. And part of the trend is being satisfied with highly processed plant-based foods. And at Chipotle, we wanted to try to satisfy the trend, satisfy the demand that our customers have for a plant-based alternative, but do it in a Chipotle way. So it's all real ingredients. So it's plant-based, there's no additives, there's no stabilizers, there's no artificial color or anything like that.

Jack Hartung:

So that's, I think, a great example, I mean, it took us a lot longer to develop this plant-based chorizo, but that's the kind of thing you can expect from Chipotle. Where if we're going to lead a trend like this, or be part of a trend like this, we're going to stay true to our values, and make sure that you can enjoy, not just the plant-based alternative, but it's going to be wholesome, made from real ingredients.

Josh King:

So now zooming out to the entire economy, Jack, what's your take on, as what we're all hearing about now, growing inflation and its potential impact on the post-COVID recovery and long-term growth?

Jack Hartung:

Yeah. I know there's a lot of talk about inflation, whether it's transitory or whether it's permanent. I think more and more folks now are talking about, at least, some of it is permanent. I'm in that at camp. I do believe that some of this inflation is not going away. Anything that's wage-based is not going backwards. The idea of wage is getting up to 15 and then even beyond, I don't see a point in the future where those flatten out or they certainly, I don't think, are going to reverse. And everything we do in this country, all the goods that we buy, whether it's chicken or avocados or tomatoes, it all involves labor. And so that part of the inflation is, for sure, going to be with us for a while.

Jack Hartung:

There is a severe disruption in the supply chain, there's been severe, or I would say extraordinary demand with the reopening of the economy, and then supply chain has not been able to keep up with it. A lot of that is logistics. I believe a lot of that is an imbalance that's not going to be forever. Now, it might take six months a year, maybe even longer for that to rebalance. So I think there's going to be some pain. I think there's going to be some inflation that is going to continue for some period of time. But I think those dislocations are eventually going to work their way out.

Jack Hartung:

In the meantime though, I do think that goods are going to cost more. Labor's going to cost more. That inflation is going to flow through, at least a certain extent, to the customer. I'm hoping that the economy doesn't shut down because of it. I mean, listen, I lived through, my early days out of college was in the early '80s, when interest rates were 18, 19, 20%. I don't feel like it's going to get back to that level. So, hopefully, this will be something we can navigate for the next year, until this dislocation is resolved.

Josh King:

Do you think overall economic conditions are going to impact what you've stated as your expansion plans to really double the number of locations from 2900 to 6,000?

Jack Hartung:

No, I don't see that changing at all. Because every everything that I'm seeing is either a dislocation that will take some time to work its way out, and I'm not worried about inflation at all. We have very high value scores at Chipotle. We don't like to raise prices very often. What we did in the May/June timeframe to increase prices to pay for the wages, I mean, I've never seen anything like that in my career. We needed to do that. But we'd rather be patient to raise prices. It's hard to get an eight dollar, wholesome meal from the kind of ingredients that we serve at Chipotle. Which by the way, if you're in New York, it's not going to be eight, it's going to be closer to 10, but in most of the country, you're going to pay eight dollars versus that kind of meal at another restaurant is typically going to cost you more than $10.

Jack Hartung:

So we know we've got the pricing power. We're not going to be in a hurry to spend it. But if inflation hits everybody, we think we're going to do as good, if not better than others. So our outlook on going from 3000 to 6,000, I'm as bulls now as ever. And even if we do hit a few bumps in the road in the short-term, that doesn't change our long-term vision and doesn't take our long-term approach to how we get there.

Josh King:

Thinking about this move from 3000 to 6,000 on expansion, under managing director, Anat Davidzon, Chipotle Canada has been expanding its operations in our neighbor to the north. Just last week, we saw the opening of the first Canadian Chipotlane. What's your vision for expansion internationally? Is that going to play the 6,000?

Jack Hartung:

Well, listen, first of all, Anat's done a fabulous job, and we hired her about three years ago, and she has done a great job at making sure the customer experience in Canada is great. Sales are rising aggressively under her leadership, and the economics look great. So we're going to build a lot more Chipotles and Chipotlanes up in Canada. Europe is a little bit further behind, and Europe got hit really hard by the pandemic. I don't know if everyone knows this, but the economy really shut down there. In this country, we feel like things got shut down. Our restaurants were completely closed in Europe, and we're in the UK, France, and Germany, for a number of months. They're coming back now, and they're coming back very, very strongly.

Jack Hartung:

We've done a number of things, including bringing our digital system to Europe. It's virtually all the way into the UK restaurants. It's in the process of going into our French restaurants. The response so far is looking great. And we've also opened some different formats, a very small restaurant under a 1,000 feet, outside of central London. We also open up in the business district. These new openings and digital's off to a good start. So if we continue to gain traction in these area, I do think in the, hopefully, not too distant future, you'll see an announcement about Europe expanding and getting more aggressive as well. The folks there, for sure, love Chipotle, I mean, that's really, really clear. We've just got to navigate through some of the business challenges over there, and the latest results are showing really good promise.

Josh King:

As we wrap up, Jack, our conversation has been circling the topic in various ways of what we think, generally, about corporate social responsibility. How does a strong purpose and focus on CSR impact affect your job as well as the company's overall balance sheet and bottom line?

Jack Hartung:

When I first joined Chipotle, the reason I jumped on a plane every Monday morning to come out to Chipotle was, I felt like Chipotle was doing something good. It was doing something good for farmers, for animal welfare, for the health of our customers. And that was a hard thing to do to leave my family, family's most important to me than anything in the world, to leave every morning, but I felt like Chipotle was doing something special. That still exists today.

Jack Hartung:

The employees that we bring into Chipotle, they really feel like they're part of something special. So you can attract the best and the brightest. When you track the best and the brightest, they're going to run through walls to make Chipotle a better company, and a better brand, because we're doing something important. So I think that's critically important that you have, not only talented, but really engaged and committed employees.

Jack Hartung:

And then from the brand standpoint, from the customer standpoint, more and more customers, they want to be part of a company that is doing the right things that does have a very strong moral compass, that has very strong social values, and not just a marketing slogan, but they actually put their money where their mouth is. And I think in Chipotle's case, it's so authentic, because we were doing this way before ESG ever existed. We were doing this before a lot of the current ad campaigns, so it's in our DNA. And so it kind of happens natural.

Jack Hartung:

I mean, it doesn't mean it's not a challenge sometimes, but from my standpoint, when I first started spending time on farms and saw how animals were raised in a traditional sense, in confinement, and how animals are raised free ranging, and according to Chipotle protocols, I made it my mission to go back to my office, go back to the spreadsheets, and make sure we built a economic model that would always allow us to make sure that we were respectful to the environment, to the animals, to the farmers, and to our people.

Jack Hartung:

And so our economic model has been built along the way since we were a small company, and we're going to stay committed to these social values. But we're going to be able to open up more Chipotle, and have you been a bigger impact on all these positive areas I talked about.

Josh King:

Well, running through walls to make Chipotle a better company and a better brand, on that very committed note, Jack, thanks so much for joining us Inside the ICE House.

Jack Hartung:

Thank you, Josh.

Josh King:

And that's our conversation for this week. Our guest was Jack Hartung, CFO of Chipotle Mexican Grill, NYSE ticker symbol, CMG. If you like, what you heard, please rate us on iTunes, so other folks know where to find us. And if you've got a comment or a question, you'd like one of our experts or listed companies to tackle on a future show, like Chipotle, email us at [email protected] or tweet at us @ICEHousePodcast. Our show is produced by Pete Asch with production assistance from Stephan Capriles and Ian Wolff. I'm Josh King, your host, signing off from the library of the New York Stock Exchange. Thanks for listening. We'll talk to you next-

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Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE, nor its affiliates, make any representations or warranties, expressed or implied, as to the accuracy or completeness of the information, and do not sponsor, approve, or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security, or a recommendation of any security or trading practice. Some portions of the preceding conversation may have been edited for the purpose of length or clarity.

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Information contained in this podcast was obtained in part from publicly available sources, and not independently verified. Neither ICE nor its affiliates make any representations or warranties, express or implied, as to the accuracy or completeness of the information and do not sponsor, approve, or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security, or a recommendation of any security or trading practice.