Jack In The Box Inc.

Good day, everyone, and welcome to the Jack in the Box Incorporated third quarter fiscal 2020 earnings conference call. Today's call is being broadcast live over the internet. A replay of the call will be available on the Jack in the Box corporate website starting today. During the question and answer period, please use your handset when asking a question. Please do not ask over a speakerphone. To queue up for a question, please press star 1 on your telephone keypad at this time for opening remarks and introductions. I would like to turn the call over to Rachel Webb, Vice President of Investor Relations and Strategic Analysis for Jack in the Box. Please go ahead.

Thank you Stephanie and good morning everyone. Joining me on the call today are Chief Executive Officer Darren Harris and Executive Vice President and CFO Lance Tucker. In our comments this morning, per share amounts refer to diluted earnings per share. We will refer to non-GAAP items throughout today's call, including operating earnings per share, adjusted EBITDA, as well as restaurant level margin and franchise level margin. Please refer to the non-GAAP reconciliations provided in yesterday's earnings release. Following today's presentation, we will take questions from the financial community. Please be advised that during the course of our presentation and our question and answer session today, we may make forward looking statements that reflect management's expectations for the future, which are based on current information. and while management will provide current thinking on this call around the potential impacts of COVID-19 on our business, given the unprecedented nature of this pandemic and the rapidly changing environment, any forward-looking statements should be considered with this elevated level of uncertainty. Actual results may differ materially from these expectations based on risks to the business. The safe harbor statement in yesterday's news release and the cautionary statement in the company's most recent Form 10-K are considered a part of this conference call. Material risk factors as well as information relating to company operations are detailed in our most recent 10-K, 10-Q, and other public documents filed with the SEC. These documents are available on the Investors section of our website at www.jackinthebox.com. Our fourth quarter ends on Sunday, September 27th. We tentatively plan to announce results on Wednesday, November 18th after market closed. Our conference call is tentatively scheduled to be held at 8.30 a.m. Pacific time on Thursday, November 19th. With that, I will turn the call over to Darren.

Thank you, Rachel, and good morning. I'd first like to take a moment to express my heartfelt thanks to our restaurant team members for keeping everyone's safety a top priority. As we provide for the needs of our guests and first responders, I'd also like to thank our corporate employees, franchisees, and suppliers for their partnership, flexibility, and ingenuity during these unprecedented times. I've only been in the role for a little over six weeks now, but they've been a very busy six weeks. I've had the opportunity to make burgers, cook tacos with team members in our restaurant. I've met with many of our valued franchisees, and I've onboarded with many of the corporate staff. In addition, I've also spent a significant amount of time with my executive leadership team. And through all of these interactions, I've been extremely impressed with the nimbleness of this brand and the willingness of our employees and our franchisees to pivot toward keeping our guests safe as well as our staff safe, which has enabled us to drive strong results in the middle of a pandemic. The passion for the brand has been evident in every interaction. As mentioned last quarter, Jack pivoted early in the pandemic to capitalize on changing consumer trends, including changing media placements, leaning into delivery, and offering indulgent, flavorful, and portable menu items. Sales for the third quarter were the direct result of this, up 6.6%. Sales accelerated throughout the third quarter, and the momentum from the end of the quarter has continued so far into the fourth quarter. We won't get into too many specifics, but this performance drives our continued outlook to be cautiously optimistic. Additionally, we will be thoughtful about what we've learned throughout the pandemic and apply it to future strategies to help preserve this momentum. Sales and cash flow remain robust, and the company is in a very strong position amidst the pandemic. Lance will share more detail on this in a minute. As we look at the results for the third quarter, same-store sales were the strongest in five years, since the third quarter of 2015. I will take a minute to outline some of the key success drivers. Over the past few years, the team has been dialing in the right value equation to drive overall sales. In 2019 and into 2020, we experienced success with our 499 bundles and upsell and add-on strategies. We continue to see these price-pointed offers appealing to our core consumers during this time. We also continue to benefit from our innovation. Since the launch in mid-January, Tiny Tacos have remained highly incremental to our overall performance. We've seen sustained success from them over the past six or so months, and they certainly appeal to off-premise occasions as they are featured in a takeout box and are very portable. Consumer response remains strong and Tiny Tacos are helping to bring attention to the entire taco category. Tiny Tacos drove transactions and bolstered check sizes as they're frequently added on to guest orders. We also launched our Popcorn Chicken, an indulgent product that is again portable and snackable during this pandemic while capitalizing on chicken trends. Our successful promotions in prior quarters have included a thoughtful upsell strategy, but Popcorn Chicken has been the most successful, offering double the chicken for $2 more. These upsell strategies are not only easy for our crews to execute, they enable the guests to get what they want at a great value and support profitability of these promotions for us and our franchisees. Customers are also starting to acknowledge our speed improvements. Customer perceptions of speed of service improved significantly in the third quarter, reflecting our continued focus on giving the guests an experience that is consistent and quick and will make them want to return. Aside from these continued strategies, we are also seeing shifts in our business as a result of changes from consumer behavior amidst COVID. First, consumers are utilizing delivery and our mobile app more than ever. Delivery and mobile app sales remain approximately double what they were prior to the pandemic. As a reminder, over 95% of our restaurants are covered by at least one of the four major delivery providers, with 80% utilizing at least three of the major providers. We continue to integrate our POS systems with these third-party providers, allowing for simpler procedures for the restaurants. Second, occasions have shifted away from the traditional breakfast day part, with consumers no longer commuting to work. but since we offer anything on the menu any time of day, we're seeing plenty of breakfast items selling later in the day. While the breakfast day part has certainly been impacted, by the end of the third quarter, all five of our day parts were positively contributing to overall sales performance. Third, we've increased sales of our more premium and indulgent items, items such as our home-style chicken sandwich and classic buttery jack. Consumers are now placing larger orders as well, typically for multiple people. These shifts in consumer behavior have led to a sustained significant increase in our check sizes during the pandemic. As our sales have improved, we shifted some of our marketing spend. The media team has been extremely nimble, leveraging consumer consumption trends around gaming and binging on social and video content to really meet the consumer where they are during this time. For example, if you recall, we moved media away from sports last quarter as most events were canceled. Now that they're back, albeit in a very different capacity, we are incorporating our brand into content and placements that make sense to the fans watching from home. Now switching gears to unit growth. Franchisees opened four new restaurants in the quarter and closed six restaurants. This brings our year-to-date total to 20 new restaurants and 19 closures, one of which was company-owned. For those of you that attended my meet-and-greet, You know I have a very strong background in development. We are currently working to get the team, the process, and tools in place to really jumpstart growth. But it's going to take some time. You are aware developing a strong new unit pipeline takes anywhere from 18 to 24 months. Looking overall at the business, we are feeling bullish about our current trajectory, especially in light of our strong performance at this time last year and continued momentum into the fourth quarter. Before turning over the call to Lance, I'd like to take a moment to address his departure. As I mentioned in the release, it certainly has been a pleasure working together, although a very short time. But I'd like to thank Lance for his many contributions and leadership to the company, strengthening our financial position and managing cash well through the pandemic. On behalf of the leadership team, you will be missed, and we wish you the best of luck in your new opportunity. We feel confident in Dawn and Sean in the meantime. And while we have already initiated the search for Lance's replacement, just know, given the strength of the finance team, we will be prioritizing finding the right person over filling the position urgently. I'll now turn the call over to Lance for a closer look at our third quarter results.