Jack In The Box Inc.

Thank you for standing by. My name is Liz and I'll be your conference operator today. At this time, I'd like to welcome everyone to the CHAC third quarter 2024 earnings webcast call. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Chris Brandon, Vice President of Investor Relations. Please go ahead.

Thanks, Operator, and good afternoon, everyone. We appreciate you joining today's conference call, highlighting results from our third quarter 2024. With me today are Chief Executive Officer Darren Harris and our Chief Financial Officer Brian Scott. Following their prepared remarks, we will be happy to take questions from our covering sell-side analysts. Note that during both our discussion and Q&A, we may refer to certain non-GAAP items. Please refer to the non-GAAP reconciliations provided in the earnings release, which is available on our Investor Relations website at jackinthebox.com. We will also be making forward-looking statements based on current information and judgments that reflect management's outlook for the future. However, actual results may differ materially from these expectations because of business risk. We therefore consider the safe harbor statement and the earnings release and the cautionary statements in our most recent 10-K to be part of our discussion. 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 and are available on our investor relations website. A quick note on conferences and events between now and our fourth quarter earnings. We plan to attend the Piper-Stanler Conference on Tuesday, September 10th in Nashville. Hope to see many of you there. And with that, I would like to turn the call over to our Chief Executive Officer, Darren Harris.

Thank you, Chris, and good afternoon, everyone. We appreciate you joining today's call to discuss our third quarter 2024 performance. I want to start by thanking everyone within our organization for their efforts in continuing to manage through a challenging environment for our industry while driving meaningful progress on our key long-term ambitions of targeting top-tier AUVs, driving digital growth, delivering industry-leading restaurant-level economics, and building new restaurants with best-in-class returns for franchisees. Our industry is operating in an unusual consumer environment, and we are quickly responding with initiatives intended to drive transactions and win share, with an enhanced focus on reconnecting with the lower-income, value-oriented guest. We realize that what you get for what you pay is more important than ever and continue to feel confident in our barbell and hook-and-build strategies to achieve that for all guest segments. Innovation, variety, and value will continue to be an important part of our offering at both Jack in the Box and Del Taco, and we will pursue messaging that breaks through to our guests. The third quarter results reflect the combined effect of a tougher sales environment while lapping a high single-digit same-store sales comparison at Jack in the Box. We took action to address many of our guests' needs with innovation and quickly adapting offers to be relevant with value. I'd like to highlight a few areas where we demonstrated a dual commitment to addressing both the current environment while remaining steadfast and driving towards our long-term ambitions. First, and in partnership with franchise operators, we took action to enhance and highlight our value offerings with the launch of our Munchies Under 4 platform with two objectives. This offering provides a compelling price point and value offer to grow transactions and it achieved pricing and menu consistency across our system for potential add-on items with the outcome of increasing items per check. To begin the fourth quarter, we have also brought back a $5 price point called Jack's Big Deal Meal as a relaunch of the Jack Pack. Our differentiated menu uniquely positions us to provide a wide range of value offers in the future, including our famous two tacos, Jack Wraps, $5 meals for munchies under $4, our $10 fan-fazed boxes, and our late-night munchie meals. Speaking of late night, we successfully executed on our commitment to a day part where we win. We partnered with Ice Cube to develop a unique munchie meal featuring our late-night fan favorite, the chicken tater melt. We certainly faced a tough comp from last year's Snoop Dogg promotion and the popular spicy chicken strips LTO. I am glad to say it met the challenge and performed above expectations with order volume for the Munchie meal outperforming year over year. This result is a great example of offering a significant value for the dollar, although the price point is higher than other meal combos. We continued pairing value offerings alongside our innovation capabilities, including the launch of Wings, our continued success with Smash Jack, and now Mini Chimneys. Because of the success of Smash Jack, which mixed above 5% in the quarter, two of our fan-favorite premium burgers just got even better. The classic and bacon Swiss buttery jack have rolled out featuring the Smash Patty, now available system-wide. We are excited to deliver it as an upgrade to our already existing strong duo of buttery burgers, and it is only the beginning of our ability to keep innovating around the Smash line. The launch of WINGS, debuting in the third quarter through digital and social channels, was very well received, while providing us solid operations knowledge for larger campaigns and future promotions. After simplifying our breakfast menu last year and impacting top line, we wanted to enhance our breakfast offering by making French toast sticks, a fan favorite LTO, permanent on the menu and part of our breakfast platters. Plus, we will incorporate breakfast value promotions into each marketing window, like we did during the third quarter, while adding innovative options like our recent introduction of chicken and waffle sticks. As part of our ambition to drive digital growth from 14% to 20% of sales, we made progress in first party, which increased 80% versus last year. First party enables us to build our loyalty membership and directly engage with our guests. At the start of next month, we will be releasing a redesigned version of our Jack app, which will provide an enhanced experience for our guests, setting the foundation for personalization and targeted loyalty offerings. As we continue to enhance our marketing and restaurant technology stack, it's important that I provide an update on the progress of our new point of sale rollout at Jack, with nearly 100 restaurants completed and a plan to be at approximately 450 by the end of 2024 and fully deployed in 2025. This POS system includes kiosk capability and will support seamless loyalty experience while unlocking future operational innovation, including enhanced inventory and labor management, along with automation and AI to reduce costs and improve speed. I want to say thank you for the outstanding effort of our IT and operations teams, as well as our Franchise Technology Committee for their tireless efforts to launch this program. we will continue to update you on the progress of this rollout. And as always, we are showing our commitment to cultural relevance and putting our Challenger brand in the bright lights in unique ways. Our promotional partnership with the biggest movie of the summer, Deadpool and Wolverine, is underway with two new products and is exactly the type of brand partnership that continues to make Jack in the Box relevant and high profile. I'm encouraged by these areas of commitment and our improving momentum heading into the fourth quarter. With a high-profile partnership, continued innovation, emphasis on value and easing comparisons, our goal is to improve transactions and demonstrate sales growth led by strategic, fundamental approaches rather than short-term actions or temporary discounting. Turning to restaurant-level economics, our restaurant-level margin declined as expected this quarter with the increased California wages from AB 1228. Over time, we will regain this margin and more through improved sales and our ongoing equipment, technology, and financial fundamentals initiatives. We have a solid line of sight to these margin enhancement opportunities, which in Q3 included increased adoption for a new oil management process, hydro rinse and labor tools, the addition of our second fryer automation test restaurant in Dallas, and our latest restaurant training programs focused on food and labor management that have the potential to drive meaningful cost savings. The team continues to work with urgency to roll these out to our entire system to maximize both our franchisee four-wall EBITDA and our company-owned restaurant margins. As it relates to restaurant growth, Interest to develop from both existing and new franchisees is being driven in part from our strong new market performance. We opened our second restaurant in Mexico during Q3, and our five Salt Lake City restaurants continue to collectively achieve over $100,000 in weekly AUVs, with now an average of 40 weeks open between the five locations. And our two Louisville restaurants are averaging nearly $70K in weekly AUVs, with performance sustaining nicely during the nine months since we entered the market. All in all, our new market restaurants continue to thrive, demonstrating that this brand is craved by customers across the country and south of the border as well. I am also thrilled about our exciting news related to Chicago. We plan to rapidly enter this key market with a plan to open up to 10 company locations in fiscal year 2025. With an eye on partnering with franchisees to continue to expand in a market with significant growth potential. This, in addition to our entry into Florida in 2025, sets us up for an exciting year for the brand, and our team is ready to make it happen. I also want to provide an update on our re-image program, which has been enthusiastically received by our franchisees. As a reminder, Jack in the Box has committed $50 million towards this multi-year program. We ultimately received requests to remodel over 1,000 restaurants, and we believe we can support approximately 25% to 30% of these with incentives. Our franchisees are now prioritizing which restaurants to reimage and gearing up for executing on the approved remodels at a more accelerated pace. This program will yield meaningful same-store sales growth and enhance the overall brand image. Shifting to Del Taco, we were disappointed with the third quarter same-store sales and margin results, but are recently seeing some early signs of improved sales performance. The new leadership team is making good progress on multiple fronts to optimize our marketing, media, and menu strategy, along with implementing operational changes to improve margins and speed of service. The Dell team is moving quickly on these efforts while adeptly dealing with the recent changes in consumer buying behavior and wage increases in California. I've been part of many brands' transformation projects in my career, and similar to the changes we have been making at Jack in the Box, it takes time. I'm confident that we have the right team in place, and I'm encouraged by their progress in executing a strategy to improve sales and profitability at a brand that stands for incredible quality and value. As an early example, we are encouraged by Dell's new menu simplification test. which has received very favorable guest feedback and has shown increased sales, speed of service, and margins. We're expanding this test in Q4 to a few markets to validate the results and gain additional learnings, with a plan for a full system-wide rollout next year. Another example is Dell's testing of kiosks, which are producing increased ticket and labor savings, and guest adoption has been even higher than expected. We will utilize the best practice knowledge we've gained at Dell as we introduce kiosks to both brands. And Jack isn't the only brand demonstrating successful new openings. In fact, our most recent three Del Taco restaurant openings in Tallahassee and Port Orange, Florida, as well as Chesapeake, Virginia, each set new records for first week sales. As we said at the time of the acquisition, Development and new market entry are initiatives where both brands can combine resources, share best practices, and use similar proven strategies from Jack's New Market Playbook to provide early performance momentum for our new Dell restaurants. I look forward to updating you on Dell Taco's strategy execution, notably top line sales, RLM improvements, results of our menu simplification, as well as more new restaurant success stories as we take the brand into untapped territories. I believe strongly, particularly as we close in on being an asset-light model and the brand's ability to deliver shareholder value in the long run and add to an even stronger growth story we are creating. In closing, we are pursuing the right initiatives with the right teams to manage through this unprecedented consumer environment for our industries. We have so much upside and opportunity within both of these brands, and we will stay focused on making the right investments, executing on the unique Jack and Bell experience that our guests expect, and doing everything we can to navigate the short term while never losing focus on supporting our ambition to create sustained, long-term value for our shareholders. Thank you again, and I'll now turn the call over to Brian.