Good day, everyone, and welcome to the Jack's Fourth Quarter and Full Year 2024 Earnings Webcast. At this time, I would like to hand 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 are Chief Executive Officer, Darin Harris; our Chief Financial Officer, Brian Scott; and our Interim CFO, Dawn 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, Darin 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 reimages, refranchising 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 in 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…

Thanks, Darin, and good afternoon, everyone. I'll begin by reviewing the results of our two brands individually and then, we'll provide details on our 2024 consolidated performance and 2025 guidance. Beginning with Jack in the Box, our fourth quarter system same-store sales declined 2.1% with franchise comps lower by 2% and company owned comps down 2.2%. This result included a decrease in transactions and negative mix partially offset by a 4.8% increase in price. We continue to drive increases in mobile and delivery channels and are excited by the early signs from our kiosk tests at both brands, which will ultimately help drive higher average ticket and restaurant efficiencies. Our ongoing investments in technology and marketing are paying off as we work towards achieving our ambition of 20% of sales through digital channels. Turning to restaurant count, we opened 16 restaurants in the quarter. For the full year, there were 30 Jack restaurant openings, the highest number in over a decade, along with 25 closures, resulting in Jack delivering positive net restaurant growth for the year. We ended the year with 2,191 restaurants. Our development pipeline continues to grow and we are tracking well for another step up in openings in 2025. An exciting example of expanding pipeline includes our recently announced deals in Chicago and Detroit, which Darin mentioned earlier. Jack restaurant level margin for the quarter decreased year-over-year by 220 basis points to 18.5%. The margin decrease was mainly driven by the lower same-store sales during a period of increases in wages from California's new minimum wage law along with certain other restaurant level cost increases. Food and packaging costs as a percentage of company owned sales declined 50 basis points to 30.3%, driven by price increases exceeding an approximately 2% increase in commodity inflation and an unfavorable…

Thank you. [Operator Instructions] We'll go first to Lauren Silberman, Deutsche Bank.

Thank you for the question. So I wanted to ask about quarter-to-date. You said it's running up 1%, which is a pretty meaningful acceleration from the fourth quarter. So can you talk about what's driving that acceleration and the extent that you expect those trends to continue as we move through the quarter? Thank you.

Thanks, Lauren. Yeah. I think what we've seen is we've had a -- our calendar has been aligned to both innovation and value during this time and we've seen, as we said, meaningful improvement to -- coming out of quarter four and into quarter one and we're running at approximately 1% same-store sales growth at Jack. A lot of that has also been, that innovation and premium has been paired with us continuing to lean into digital. As you know, we've rolled-out our new app. We are about to roll out into an Android component of that app as well. And all of these things are working to drive sales in a more meaningful way.

We'll go to the next question from Brian Mullan, Piper Sandler.

Hey. Thank you. Just a question on Del Taco. I just want to ask about the restaurant level margin guide for the year. If we go back to the Investor Day in January, we got to hear a lot from Tom Rose and the opportunity to actually grow these over-time. So I know it's a tough consumer environment and you're dealing with AB1228. So my question is really just do you still feel good about the work that has gone on behind the scenes? Maybe what's the right way to think about a normalized margin in that business and what the path is to get to where you want to be?

So, Brian, I think the work that we're doing similar to what we did at Jack with financial fundamentals is working and in progress. And I think some of the discipline that Tom has implemented around inventory management and other things has enabled us to run our P&L from a food and packaging standpoint substantially better by almost 2 points than we did in the past. The real challenge has been with AB1228 and the inflation we've had related to it has driven up labor by about 4 -- a little over 4 points. And then also with electricity in California in some of our restaurants, it's also been driving up the P&L. So the key here is driving top line. And if we drop top -- drive top line, I think the margins come in line and it all flows. And the last thing I would say, with the new menu rollout that we introduced at Investor Day, we're seeing substantial improvement in our business from a top line standpoint and a bottom line standpoint and it is going into the system this week and will be systemwide within the next couple of weeks.

The next question will come from Sara Senatore, Bank of America.

Hi. Thank you. This is Katherine Griffin on for Sara. We wanted to ask to what extent would you attribute the softer performance in the quarter to the demand backdrop in California versus your own sort of share loss or relative underperformance? Thank you.

I missed the last part of that question.

No problem. I'll repeat it. Yeah, I just wanted to -- just trying to figure out the -- to what extent was the softer performance in the quarter a function of the broader demand backdrop in California versus your own share loss and relative underperformance?

Yeah, go ahead.

Yeah. This is Brian. No. California has actually performed relatively well for us. If you look at our -- the Q4 performance for Jack, it's in line, it's not slightly better. So, we've seen a -- as we talked about even the last quarter, although we did take more price and we had a little more of a traffic impact, the California, it's such a strong market for us, it's actually held up well. So, there's been variation across different regions and some of that is based on what's going on in the consumer behavior in those markets as well as some price take differences with our franchisees. But overall, the price discipline and the strategy we've had in California is -- it's held up well. So that -- it's not -- it's really more of an industry issue. I think that all the QSRs have faced in the last couple of quarters and we're not immune to that, but overall our performance in California, we've been very pleased with and feel good about it going-forward as well.

And I'd add to what Brian said. We're also seeing the same. Del Taco, California tends to be the best-performing of the regions. And then also as you think about industry-wide, if you measure industry-wide, all cohorts at all income levels are showing less QSR spend and transactions and that also is age, ethnicity, gender and overall demographics and income levels. So, we know that QSR transactions are softer than they've been historically and we anticipate that improving into 2025.

Great. Thank you, both.

Thank you.

Your next question is from Brian Bittner, Oppenheimer.

Thanks. As it relates to the Jack in the Box brand, it is encouraging to see you continue to make progress on the gross openings and development agreements, but elevation in the closures, they do continue to pressure the net impact of this progress. So, Darin, do you have visibility into the current health of the bottom quintile of stores within that franchise portfolio? And do you have a line-of-sight to these closures subsiding and improving the net impact of the progress you're making on the gross openings?

Yeah. We continue to see that our closures -- what we saw in Q4 is we went ahead and accelerated some closures with all the openings we were having to get in front of it, especially with the environment we're in. We feel good about the health of the system. If we just look at our financial -- our franchisees financials, they basically held flat when we compare last year to this year. And so we feel good about the overall health of the system. If we think about going-forward closures, we've always suggested on these calls that historical averages somewhere between 16 and 18 a year to 1%, which is more industry norm would be kind of the run rate of closures. So that's what we anticipate going-forward is more of an industry norm.

Thank you.

Next up is Gregory Francfort, Guggenheim.

Hey, thanks. Thanks for the question. My question is just on what the CapEx and just the guidance for next year? Brian, can you maybe break-down how much of that is going to go into new stores versus maintenance CapEx versus investment projects? I'm trying to get maybe how elevated that is versus what it could be in a couple of years. Thanks.

Yeah, no doubt. And you can reference back to the Investor Day presentation as well. There's no -- there's been no real material change in our strategy we've talked about. Our top priority is investing in the strategy that we have. We're seeing it pay off. We mentioned digital. It's -- we're making really good progress in growing our digital mix and that does take investment. And so that as you look at fiscal '25, the technology investments are relatively similar. The -- we're looking at somewhere in the $40 million to $45 million range for both digital and restaurant technology and kind of other corporate systems with the biggest components being the kind of rollout of our POS. And I want to make a comment as well. I think on our prepared remarks, we want to make sure it's clear that we expect to have about 550 stores with the POS implemented by the end of this calendar year. And we'll -- we are targeting to have the whole-system completely on the new point-of-sale by the end of 2025. I think that was -- we might have gotten that little bit wrong in the prepared remarks, just to make sure that's very clear. We're on track with what we've talked about in prior calls, making really good progress, digressing a bit here like -- it's gone really smoothly, the implementation of the POS. So really proud of the teams in that process. And again, we're on good track to be able to get the whole-system over by the end of next year. And so that work with the point-of-sale implementation as well as just work around digital. We've got the new iOS version of our app, but we've got more work to do on Android, new web interface and then building out a lot of our loyalty. We can drive more personalized messaging to continue to grow our loyalty program. Those all are really critical investments as well as some in-restaurant operational system enhancements. So that's a -- that's pretty much in line with what we've talked about before. The other step up we've had though in '25 is on the new restaurant openings. We're looking at somewhere by north of $30 million -- somewhere in the $30 million to $40 million range. And that again is aligned to what we shared earlier this year. As we really continue to kind of ramp-up here in some of these new markets like Chicago and soon to be Florida, those are corporate dollars into those new markets. And then the rest is going to cover a variety of things like maintenance stores, REIT and reimages we're doing in the company restaurants.

Brian, I'm going to miss you being in this room. It's great. You flabbergast me how you can get-in there and remember to say things like the POS and the rollout that we're going to have completed this year and next year.

Thank you.

Next up is Alton Stump, Loop Capital.

Great. Thanks for taking my question. I just wanted to ask on Jack in the Box growth front. Obviously, congrats on the over-decade high openings and office site development deals. I just ask -- given the fact that as you have pointed on this call, it's been a tough overall macro-environment over the last couple of quarters, in particular, has that had any negative impact on the appetite for franchisees to build Jack in the Box units or are they looking a bit longer-term and therefore, it has not impacted their wage bill?

Yeah. And I'm glad you ask. I mean, we're signing more development agreements than we've ever signed. We're excited about our pipeline. Jack, just to give you an example, we have 18 restaurants under-construction now. We have 54 in design and permitting and 32 approvals for sites. And so our site pipeline is as strong as it's ever been. Again, I think we said this year, we had a 101 development agreements for 464 restaurants in place, 51 of those have opened since we started this process. And so we have a good pipeline. We signed 22 new franchisees. Our new markets are working. Salt Lake City, we've already opened nine and those are averaging 90,000 in AUV so far. Louisville, the same to open 60K in AUV with eight restaurants coming; Mexico; Chicago. So we think the development pipeline is starting to build the momentum that we had hoped for. I think in our early comments, in my comments, in my script, I mentioned that this year, the 30 openings were the most gross openings since we've had since 2012 and we -- as we've guided to believe we'll accelerate that even into this year in 2025. So, we feel good about what's happening with our development pipeline. Our franchisees are supportive and we'll continue to add more new franchisees to our future.

The next question is Dennis Geiger, UBS.

Great. Thanks, guys. I wanted to see if you could talk a little bit more about the Taco refranchising and kind of what feedback you've had there, how demand has been? Any kind of updates that you could give on the timeline or milestones as we think about franchise percent levels, obviously seeing good progress, getting good agreements tied to those sales. But just any other update and -- as we look ahead to potential milestones? Thank you.

Yeah. So with Del Taco, we're at about 80% refranchised today and we would call that asset light. We'll continue to refranchise. We have deals and works now for about 13 restaurants. And then what we're going to do is we're going to continue to evaluate how AB1228 has impacted us in topline, how it's being impacted by this kind of restaurant environment. It's because we want to maintain margin and grow margin and make sure we're getting the valuation for these restaurants that they deserve. And so that's where we're going to hold steady to. We still have good demand. We still have deals that we could execute, but we're in a holding pattern right now just so we can make sure we can recapture some of the margin that has been challenged in the environment we've had.

Makes sense. Thank you.

We'll go next to Jon Tower of Citi.

Hey. Thanks for taking the question. I was just curious, Darin, you ran through a lot of the new product news that's come out in fiscal '24 and some more coming in 2025. And I'm just curious how you communicate that message and balance the operations against it and frankly get the best return on the advertising spend, in particular, given all the new food that's out -- all the new food news that's out there. It just seems like there's a lot of activity. And I'm just curious if that's cutting through to the consumer. And then kind of following-up on that, have you offered -- and I apologize if you did on the call, any thoughts around pricing into fiscal '25?

So as it relates to how we're driving sales and communicating to our guests, I think it goes back to a lot of the great work that our team has done around brand positioning and brand strategy and optimizing our media spend to maximize reach and awareness. And so I think making sure we're hitting the right audience at the right time with the right offer. And what we found is that we have to -- the deals that are in the marketplace are important to kind of keep your guest base, but we also have to answer both sides of it with the premium and the value at the same time, making sure we're thinking about different offers by daypart and then also leaning into digital aggressively because it is now a channel that is become a regular kind of weekly occasion for most guests. And so we need to make sure we're communicating all the right areas at the right times.

And I can -- on the price side, but our view right now for Jack for fiscal '25 is around 3% to 4% price and for Del is 5% to 6%. I mean, think about as kind of two parts of that. We've got some -- we have rollover of about 2% on the Jack side. So we're looking at another kind of 1% to 2% price take during the year. And then on the Del side, we're going to roll over about 3% price and then looking at another 2% to 3% price during the year. Some of that's -- a lot of that is aligned to the new menu that we're rolling out and that has some changes to the pricing that puts it a little bit higher than Jack, but we're predominantly focused on just very strategic price increases on certain items. So, a little more of a normalized environment on the pricing side that's embedded into that same-store sales guidance that we gave.

Got it. Thanks for taking the questions.

Sure.

Logan Reich, RBC Capital Markets is up next.

Hey, good afternoon. Thanks for taking the question. I had a follow up just on the franchisee profitability side. Obviously, gross openings are encouraging and you guys have faced some headwinds in the business that sort of appear to be turning around. How do you -- how would you characterize franchisee profitability today and sort of outlook on how that's going to trend through next year or 2025?

I think it comes down to sales growth. I think we've done a good job with the programs we've rolled out and really helping them manage the P&L effectively and efficiently. It really comes down to if we get top-line growth and it will flow. If we look-back, as I mentioned, franchisees currently in the most recent data that we received are running basically flat year-over-year on profitability. Now with AB1228 continuing into 2025, I'm sure it will impact the P&L somewhat just like it is for us. I mean, we're seeing -- that's a lot of the headwind you see in the guidance that we've provided is, if you annualize AB1228 just on our company restaurants, it's $15 million of the impact. So it's a large number. So, franchisees in California will definitely feel some of that unless we offset it with more top-line growth and then some of the things we're doing from a cost standpoint.

And just keep in mind our franchisees are -- many of them are multi-unit owners and they've run at a good level of profitability. So they are able to absorb some of this near-term pressure. And again, we've driven improvement in the margin through a lot of the financial fundamentals. And so they're -- we'll navigate through this. They're aligned with us. And overall, again, since they own multiple locations, they're performing well overall. Again, obviously, everybody is happier when you have top-line sales growth and we're set up for that -- that to flow straight through the bottom-line. But overall, the system is very healthy.

Great. Thanks.

The next question is from Alex Slagle, Jefferies.

Hey, thanks. You talked about a big focus on digital and improving execution and I think back to the basics approach at Jack in '25. So I was wondering if you could expand on that a little bit, add some color on what you're going to be doing differently.

Yeah. The main focus is on how do we obsess about improving the guest experience and we're going to structure around that. We're going to make sure that we focus on programs that are scalable and back to the basics specifically around frictionless digital because we know that is where the business is heading. Since 2019, it is the only aspect of the QSR business that has grown. So we -- as we continue to invest in our digital stack and our Martech stack, we also need to invest at the restaurant-level and how do we make sure that experience is amazing for our guests and then improving the accuracy both in our digital business, but also at the drive-thru. So that will enable us to reduce alerts. It's something that we hear from our guests that we can improve on and we're going to make sure we do that in 2025. So aligned around it in the entire organization.

And again, that all -- that's all set up by the new app, the enhancements we're going to make to our loyalty program, the new point-of-sale, all of these are kind of the cornerstone of the backbone of everything Darin just described. And again, the teams have done a phenomenal job executing. We're making progress. We're seeing it already in the performance with the growth we saw in first-party in the fourth quarter. That has accelerated into the first part of '25. Again, a lot of it driven by the new app, but the marketing team has also done a really good job of looking at the digital channels and optimizing on them and that's driving incremental transactions on both first and third-party and we expect that to continue through this year.

Got it. Thank you.

Andrew Charles from TD Cowen has the next question.

Great. Thanks. Darin, it's good to hear you've seen sales improved to the high end of your 2025 same-store sales guidance range. But with your largest competitor set to release a bazooka of value deals in early calendar 2025, what needs to be done to profitably protect traffic as you anticipate commodity inflation to pick-up? And Brian, if I could just squeeze in a quick follow-up, can you quantify the impact quarter-to-date from your largest competitors who take the challenges? I just presumably had some benefit for you for the Jack brand. Maybe said differently, did quarter-to-date accelerate after October 22nd?

So, Andrew, I think the best thing that we can do is always be uniquely Jack and focus on our brand positioning and what makes us different. And we can do that through the means of what we do is all day every day. We lean into our innovation and premium and value and then we do advance our digital capability, which we've been doing. I mean we're having -- we're at about 14% to 16% digital sales today. We still have plenty of opportunity to grow that because we're behind the industry from an investment standpoint and we're catching-up rapidly and we're seeing that advance our business and we're going to continue to do that. So just as an example, our loyalty users upper -- our growth in loyalty is up to 107%. We know there's opportunity there. So we're going to continue to focus on how do we get better at that business model. And then the second part of the question, Brian, do you want to talk about what he had asked about McDonald's and...

Yeah. We were already seeing improvement on the Jack trends before that. So, there's no doubt that everyone gained a little bit of share from their challenges. But like I said, we were fortunate that I think the actions that we took in the back half of '24 were already starting to take hold as we went through the fourth-quarter and that trend was starting to pick up into the first-quarter. And so I think that -- again, everybody probably gained some, but it's not -- we don't look at that as the primary driver of the better start to the year. I think that's why we are being a little bit cautious to on a full year guide because we don't -- nobody knows exactly what that impact was and how it will impact the industry, but again, we were already encouraged before that happened about the trends we were seeing.

Very helpful. Thanks.

From Goldman Sachs, Christine Cho has the next question.

Yeah. Thank you for taking the question. So could we talk a little bit more about value? So could you talk about how value mix trended this quarter and how you're thinking about the balance of the promoted value versus everyday value in your menu? Are there any modifications that needs to be made given the changing competitive dynamics and returns on the value promotions?

Yeah. So as an example, during Q4, our Munchies Under $4 that we've talked about, it was the first full-quarter in action and we saw about 120 basis points improvement in trends for that value component of our menu. And so we're excited about what the Munchies Under $4 has done for our business model. It also led to addition to check, which we haven't seen for a period of time and add on. And so we'll continue to focus on growing our Munchies Under $4 business. And then what we saw with our digital performing offers, our $5 breakfast and our two for $3 or two for $5 really helped us during the quarter.

Next up is Brian Harbour, Morgan Stanley.

Yeah. Thanks. Good afternoon, guys. I had a question about a couple of pieces that just feed into your guidance for next year. Have you assumed any refranchising sort of beyond the 13 that you mentioned? And I don't know if -- are there any G&A savings that you come from that? It seems like maybe not at this point. And then also just kind of what drives the repurchase assumption relative to kind of what you did in '24?

Yeah. This is Brian. So no, we do not have anything beyond the 13 restaurants that we expect to close here very shortly in the guidance for next year. We've generally not provided that just because it's hard to know magnitude and timing of those. And as Darin mentioned earlier, we will likely won't see too many more this year unless somebody really wants to step-up because we want to make sure we get good value for these high-quality restaurants. So I think the other, the -- in terms of the share repurchases, again, we are looking at prioritization of our operating cash flow and how we deploy it. And again, the investments we talked about through our CapEx are kind of priority number one. We'll get a good return on those and then we've got our dividend. So we're just really right now just modeling out a very comfortable amount of free-cash flow that we can deploy into repurchases. We'll continue to adjust that during the year. But again, the greatest way we can deliver shareholder value long-term is investing in our strategy. And so that's where we've had to make some trade-off and repurchases to achieve that. But that's exactly aligned with what we've laid out in our strategy this year. I will add just a couple of other points that we didn't guide on just to make sure everybody is kind of aligned on it. One is the interest expense for the year, we're assuming about $80 million in the guide. And then the other on the preopening costs, I kind of made a note about pre-openings, which we separate from our traditional SG&A. We were about $2.5 million in fiscal '24. With the increase in the number of new restaurant openings next year, that number we expect to be closer to $5 million. So that just helped shape a little bit too as you're looking at your models to align with the guidance that we gave.

Thank you.

Next up we'll hear from Drew North, Baird.

Thanks for taking the question. It's a bit of follow up on John's question earlier. Was hoping you could share some of the metrics on the Jack comps performance for Q4. I know you mentioned the perspective on pricing in the prepared remarks, but where did traffic and mix shake out for the quarter? And then the follow up being, how are you thinking about the cadence of traffic embedded in your guidance for 2025? And if there's any notable quarterly volatility to be aware of?

Trends were flat basically from quarter-to-quarter. Mix increased slightly -- or improved slightly, I should say. And then price was lower than the previous quarter.

I mean, traffic was down about 5%. Again, it did improve slightly from the third-quarter. But you'll -- you can kind of work your back to it. And again, in next year, we gave some expectations around price for the full-year and so you can -- you've got to work back the difference on that between the price and the same-store sales is going to be a combination of traffic and mix.

And everyone, that is the last question today. That does conclude our question-and-answer session. That also does conclude our conference. Thank you all for your participation. You may now disconnect.

Thank you all.