Jack In The Box Inc.

A good day, everyone, and welcome to the Jack fourth quarter and full year 2024 earnings webcast. At this time, I would like to turn the call over to Mr. Chris Brandon. Please go ahead, sir.

Thanks, operator, and good afternoon, everyone. We appreciate you joining today's conference call, highlighting results from our fourth quarter and fiscal year 2024. With me today, our Chief Executive Officer, Darren Harris, our Chief Financial Officer, Brian Scott, and our Interim CFO, Don Hooper. Following the 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 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 those expectations because of business risks. We therefore consider the safe harbor statement in 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 also available on our investor relations website. And with that, I'd like to turn the call over to our Chief Executive Officer, Darren Harris.

Thank you, Chris. In fiscal 2024, we achieved really significant milestones for our company with the largest number of new restaurants opening in over a decade for Jack in the Box with sustained sales outperformance in new markets. positive net unit growth at both brands with a growing new restaurant pipeline, progress on brand building initiatives, including first and third-party digital, new POS rollout and restaurant re-images, re-franchising of Del Taco, now an asset-light business at about 80% franchise-owned, and lastly, managing through significant inflation plus the cost pressures from increased minimum wages in California. Entering 2025, I am encouraged by the start to the year and believe strongly in our ability to continue executing on our transformation strategy to deliver results and shareholder value. I am thrilled to report the recent hiring of our new CFO, Lance Tucker, a familiar face to both the restaurant industry and the Jack brand. Lance will be a terrific addition to our leadership team and will get acclimated very quickly with our teams, many of whom worked with Lance in the past. and our business. Most importantly, he will take the time to connect with franchisees and build relationships. With that said, let's briefly look back at 2024, particularly the progress and results related to net unit growth, new market openings and digital. Our growth plan, several years in the making, is beginning to take shape and show results. There were notable macro challenges that emerged during the year, and I want to thank our franchisees and restaurant leadership teams for their efforts and dedication in serving our guests and making progress on our key long-term ambitions related to digital sales, unit economics, and new restaurant growth. We battled through a tough environment that brought top-line headwinds to the industry, and we are adapting to this new environment to accelerate sales throughout 2025 and beyond. Our investments in modernizing restaurant technology and advancing our digital capabilities are now contributing toward the ambition objectives we shared last January, including becoming a 20% digital business by 2027. We will have nearly 550 Jack in the Box restaurants on our new POS by the end of calendar 2025. all of which include flipped kiosk capabilities. I want to extend a huge thanks to our technology teams and franchisees for the tremendous efforts in making this a seamless rollout. Although it is early innings, using the new kiosk capabilities, we are experiencing a double-digit increase in average check, helped by upsell and menu visibility. We are now starting to test freestanding kiosks and are excited to see how this can drive additional sales and labor efficiency. New network capability added to all our restaurants this year, plus the POS implementation, enabled us to begin testing kiosks. We also launched our new iOS Jack app during the fourth quarter, with immediate benefits including an improved user experience, speed of ordering, incremental sales, and accelerated acquisition of loyalty members. With digital now at over 14%, the combination of the new POS and App for Jack will allow us to dramatically improve our loyalty program to deliver personalized offers and promotions to our growing loyalty guest base. First party sales continue to grow, higher by 83% year over year in quarter four. And third party, now at nearly 70% of our total digital business, continues to grow consistently and was up high single digits. First Party also saw record-setting sales over the last eight weeks. Our digital investments are leading to incremental sales and a growing loyalty membership, which makes reaching guests more efficient and gives us confidence that digital can make a strong contribution in growing total sales this year. And this progress is expected to continue with the upcoming launch of our app for Android and a new mobile web ordering platform. Now, we attacked the macro backdrop aggressively in the fourth quarter, highlighted by our Munchies Under 4 platform, which drove an everyday value message and resulted in increased items per check and year-over-year improvement in average ticket. This will remain a permanent part of our menu and will continue to evolve and expand. Our focus on value has continued through the recent LTOs of our Bonus Jack and two-for-three-dollar Monster Tacos, which have been successful. Early in the quarter, we saw a strong average check supported by our spicy chicken strips, and we made news with our Deadpool and Wolverine partnership, which featured many chimneys as a product tie-in. Breakfast improved in the fourth quarter, supported by French toast sticks permanents and LTOs including the chicken and waffle sticks and scrambler sandwiches. We will continue to feature breakfast value in every window. highlighted by our $5 breakfast meals and two for $3 breakfast jacks. I'm encouraged to see this day part moving in the right direction. The late night day part continued its streak as our best performer, but followed closely by a much improved dinner day part. As I stated earlier, I am pleased with the start to fiscal year 2025. This emphasis on digital value and innovation helped us exit the fourth quarter with sales and transaction momentum. with first quarter to date running at about 1% positive same store sales. Look for us to continue to reach both the value and premium guests with innovation as we currently are executing with our Biscoff shakes and donut holes, as well as Birria tiny tacos and the introduction of our sourdough smash jack. We will also support both value and breakfast as we have with our $5 meals and munchies under $4. We will drive digital via first and third party offers and aggressive activity. And we will bring back fan favorites as we are currently doing with our Potato Wedges LTO. Shifting to unit growth, our primary initiative to drive long-term shareholder value. We are now at 101 development agreements for 464 restaurant commitments. And we signed our first franchise agreement for Chicago in Q4. which will be incremental to our eight company-owned locations opening this year. Chicago is also part of our current cloud kitchen test with two locations up and running. But I am certainly excited to cut the ribbon on our first full restaurant location in the second quarter of this year. This, in addition to our entry into Florida later in 2025, sets us up for a special year for the brand, and our teams on the ground are working hard to ensure a terrific first impression of the Jack experience in these two new markets. In addition, we recently signed New Frances agreements to join our growth effort in Mexico, completing six new restaurant commitments to open in two new territories. And just this week, we completed a development agreement to enter Detroit, our second market in Michigan. Restaurant openings and new market performance were both a major highlight in 2024. a year where we increased our gross openings by 50% with 10 more restaurants than prior year and saw sustained momentum of new restaurants in white space markets. New restaurants continue to outperform the system in both core territories and new markets. And of our 30 new restaurants in fiscal 2024, five opened in Salt Lake City and continue to collectively achieve over 90K in weekly AUVs. With three restaurants now open for over a year, our two Louisville restaurants are averaging nearly 60,000 a week, with performance sustaining nicely during our first full year in the market. And our two Chihuahua restaurants in Mexico, while still early, are performing better than expected. Bringing new franchises into Jack in the Box has been a major focus for our team since the beginning. And we are seeing that focus pay off. We have added 22 new franchisees to the system, the most in our brand's history. We are thrilled to have these new operators join Jack during this key moment for our long-term growth story, which is currently ahead of schedule. While it's still early in our re-image program, We have committed $50 million on a multi-year basis to support the over 1,100 requests for remodels we have received. And we are beginning to see some progress. We have now completed 17 of our industrial re-images, with 67 in the design and permitting stage. And the future of our re-image platform, the Crave Design, now has 377 sites approved to participate in our capital incentive program. This is a great start. And we look forward to providing more updates in the future, including performance from these restaurants, which have historically ran around a 15% same-store sales lift. Our margin improvement initiatives continue to roll out, and we believe both our franchisee and company-owned restaurant-level margins will improve. We're also in the process of finalizing our beverage provider contract and believe the new equipment will improve product quality, and definitely generate significant cost savings that will benefit restaurant-level margins. These initiatives, which include oil management, inventory management, and continued equipment implementation, will continue to help offset AB 1228 and other cost pressures we are facing. In 2025, we will update our organizational structure to be more focused on the guest and their experience with a back-to-basics operational approach through a frictionless digital pickup experience. Our guests expect and we will deliver better speed and accuracy at the drive-through. And we will absolutely have an obsession to reduce guest alerts, especially on these digital orders. We believe all of this will lead to a better overall guest satisfaction. And when you couple this with our great tasting food, and all-day, everyday menu variety, it will make the future Jack experience more valuable for our guests. Now, I want to turn to Del Taco. The leadership team there is making progress to transform this business, and that's helped by our first brand research study and guest segmentation work in seven years. We will be enhancing the media and marketing calendar that aligns to this segmentation work. We will focus on rebuilding the innovation pipeline to support a barbell offering to meet the demands of both the value and premium guests. Very, very excited to report that our new menu initiative launched system-wide yesterday. After a successful test demonstrating improved speed, positive feedback from operators, and improvements to top and bottom line performance. We look forward to reporting on how this performs throughout the remainder of the year and beyond. The team is working hard towards positioning this brand to compete for the long term and grab share from the number one player. I've been part of many brand transformation projects in my career, and this takes time. but I can see the progress being made. For example, our transactions saw sequential improvement for the first time in several quarters, demonstrating that our focus on value may be starting to take shape. I'm optimistic that we will begin to see fundamental improvements in 2025, led by an improved innovation and media calendar, expanding the rollout of freestanding kiosks, with 63 now installed and 300 additional planned by the end of 2025, where we have seen a 15% to 20% average check lift from kiosk orders. We will add catering, representing a brand new ordering occasion and currently something we have under test. We will evolve the Dell YOW Rewards program and we will focus on scalable cost and margin saving initiatives similar to those up and running at Jack in the Box that will dramatically help the bottom line. I'd also like to note our progress on making Dell Taco an asset-like business, as we are now at 80% franchised. Our new Dell franchisees are very excited about what the future holds, now operating within a category that represents incredible opportunity to grow and gain share. In closing, I'd like to take this opportunity to thank Brian for his time with Jack in the Box and wish him well on his return to his former company and industry. And I'd also like to thank Don Hooper for stepping up once again to serve as interim CFO between now and Lance's start in mid-January. I anticipate 2025 to be an outstanding year of progress towards achieving our ambitions and delivering sustained long-term value for our shareholders. I'll take this moment now to turn the call over to Brian.