JACK IN THE BOX INC Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Top Line Environment: Significant pressure on multiple-income cohorts, negative traffic; focused on barbell strategy, digital growth, and innovative limited-time offers (LTOs).
• Tech Modernization: 18% digital sales systemwide; new point-of-sale (POS) system implemented in nearly 1,500 restaurants, but encountered integration challenges with legacy systems affecting second quarter sales.
• Jack on Track Plan: Strengthen balance sheet, close underperforming restaurants, return simplicity to the business model; more details to be provided in August.

Segment Performance

• Jack Brand: Second quarter same-store sales decreased 4.4%, with franchise restaurant comp down 4.5% and company-owned sales down 4%. Restaurant level margin percentage was 19.6% (down from 23.6% last year). Franchise level margin was $68.3 million (40% of franchise revenues).
• Del Taco: System same-store sales declined 3.6%, with franchise sales down 4.2% and company-owned comp down 1.7%. Restaurant level margin was 12.8% (down 400 basis points from prior year). Franchise level margin was 24.4% of franchise revenues (down from 28.9% last year).
• Consolidated: SG&A was $35.5 million (10.5% of revenues). Consolidated adjusted EBITDA was $66.5 million (down from $75.7 million prior year). Reported GAAP diluted loss per share was negative $7.47; operating earnings per share was $1.20.

Guidance

• All guidance measures remain as provided in the April 23rd Jack on Track plan announcement.

Risks

• Challenges with integrating new POS systems and legacy systems, temporarily impacting sales.
• Industry headwinds affecting multiple-income cohorts and consumer caution.

Question and Answer

Q: Current trends of Jack relative to the down four point in 2Q and geographic differences?

A: Third quarter running in line with second quarter; challenging industry environment, consumer cautious; focus on core strengths and equities.

Q: Comp pressure driven by company-specific headwinds beyond POS?

A: IT issues, over-index on low-income consumers; focus on Munchie Meal, new fries flavors, and value guest in.

Q: Key priorities for Del Taco while exploring strategic alternatives?

A: Continue operational execution, revamp marketing, and drive menu innovation.

Q: Step-up in allowance for doubtful accounts and store closure program risk?

A: Step-up related to specific franchise matter on Del Taco side; closure program not expected to increase bad debt expense.

Q: Value positioning and plans?

A: Focus on balance of value, ownable equity of Munchie Meal, core offering with right items at right price.

Q: Conversations with franchisees and price rolling off?

A: Conversations with franchisees have been good; price rolling off over 2% from November's 3-4%.

Q: Closures concentration, new markets?

A: Closures spread throughout system; continue to grow in new markets, more franchisee-led.

Q: Other alternatives for Del Taco besides divestiture?

A: Early interest in Del Taco, likely divestiture as preferred route.

Q: New unit development and restaurant commitments?

A: Excited about new unit growth; development agreements at 440 since mid-2021.

Q: Observations on food cart performances, breakfast/late night pressure?

A: Even spread across day parts; success with certain executions, focus on barbell strategy.