Jack in the Box Inc. Reports Third Quarter 2024 Earnings

Jack in the Box same-store sales of (2.2%)

Del Taco same-store sales of (3.9%)

Jack in the Box systemwide sales of (1.3%); Del Taco systemwide sales of (3.2%)

Diluted loss per share of ($6.26), including a $162.6 million non-cash goodwill impairment charge for Del Taco

Operating EPS of $1.65

Jack in the Box signed 3 development agreements with new franchisees for 28 new restaurants

Jack in the Box entering Chicago market with multiple company-owned openings in FY 2025

Jack in the Box progressing on tech and digital transformation with nearly 100 restaurants on our new POS system and our next generation app going live on September 1st

Del Taco's three most recent restaurant openings, in Florida and Virginia, all set new company records for first-week sales

Jack in the Box Inc. (NASDAQ: JACK) announced financial results for the Jack in the Box and Del Taco brands in the third quarter, ended July 7, 2024.

“I am proud of our teams and how they continue to enhance the guest experience and deliver operational improvements during a challenging sales environment for our entire industry,” said Darin Harris, Jack in the Box Chief Executive Officer. “We continue to focus on value and ways we can improve transactions with the low-income guest — while at the same time, doubling down on our strengths of innovation, variety and late night. We will strive to finish the year strong with positive momentum heading into 2025, while continuing to execute against our strategic initiatives to achieve our long-term growth and profitability ambitions.”

Jack in the Box Performance

Same-store sales decreased 2.2% in the third quarter, comprised of franchise same-store sales decline of 2.4% and company-owned same-store sales increase of 0.1%. Transactions were down from prior year although slightly improved from last quarter. Systemwide sales for the third quarter decreased 1.3%.

Restaurant-Level Margin⁽¹⁾, a non-GAAP measure, was $21.1 million, or 21.0%, down from $21.1 million, or 21.8%, a year ago driven primarily by higher costs for labor and other restaurant operating costs, partially offset by lower food and packaging costs. The increase in labor was driven in large part from implementing California's new minimum wage law.

Franchise-Level Margin⁽¹⁾, a non-GAAP measure, was $74.6 million, or 41.1%, a decrease from $75.3 million, or 41.1%, a year ago. The decrease was mainly driven by the decline in franchise sales for the quarter.

Jack in the Box net restaurant count remained flat in the third quarter, with three restaurant openings and three restaurant closures. Since the launch of the development program in mid-2021, the company has 96 signed agreements for a total of 437 restaurants, with 46 restaurants opened to date.

Jack in the Box Restaurant Counts:

Del Taco Performance

Same-store sales decreased 3.9% in the third quarter, comprised of franchise same-store sales decline of 4.1% and company-operated same-store sales decline of 3.5%. Sales performance resulted from a decline in transactions, partially offset by an increase in average check. Systemwide sales for the fiscal third quarter decreased 3.2%.

Restaurant-Level Margin⁽¹⁾, a non-GAAP measure, was $8.8 million, or 13.4%, down from $17.7 million, or 17.4%, a year ago. The decrease was due mainly to refranchising restaurants, and the margin percentage decline was driven by increased costs for labor and utilities, partially offset by menu price increases. The increase in labor as a percentage of sales was a result of implementing California's new minimum wage law and the sales decline.

Franchise-Level Margin⁽¹⁾, a non-GAAP measure, was $5.8 million, or 27.1%, compared to $5.5 million, or 36.7%, a year ago. The decrease in margin percentage was driven by the impact of refranchising and the associated increase in pass-thru rent and marketing fees.

Del Taco restaurant count in the third quarter had five restaurant openings and three restaurant closings. Subsequent to the quarter, 27 Del Taco restaurants were refranchised, which included a development agreement for 25 additional restaurants.

Del Taco Restaurant Counts:

Company-Wide Performance

Third quarter diluted loss per share was ($6.26). Operating Earnings Per Share⁽²⁾, a non-GAAP measure, was $1.65 in the third quarter of fiscal 2024 compared with $1.45 in the prior year quarter.

Total revenues decreased 7.0% to $369.2 million, compared to $396.9 million in the prior year quarter. The lower revenue is primarily the result of the Del Taco refranchising transactions. Net loss was ($122.3) million for the third quarter of fiscal 2024, with the loss resulting from the goodwill impairment noted below. This compared with net earnings of $29.2 million for the third quarter of fiscal 2023. Adjusted EBITDA⁽³⁾, a non-GAAP measure, was $78.9 million in the third quarter of fiscal 2024 compared with $81.6 million for the prior year quarter.

Company-wide SG&A expense for the third quarter was $29.6 million, a decrease of $10.0 million compared to the prior year quarter. The decrease was due primarily to lower incentive-based compensation, a favorable adjustment to our workers compensation and general liability reserves, and gains on the cash surrender value of our company-owned life insurance policies. When excluding net COLI gains, G&A was 2.0% of systemwide sales.

During the third quarter, the Company recognized a goodwill impairment of $162.6 million to the Del Taco reporting unit. This is a non-cash charge that does not impact future operations and is the result of an internal goodwill impairment assessment triggered by i) a recent negative trend in Del Taco same store sales, ii) lower margins due in part to wage increases required in California effective April 1, 2024 under AB 1228, iii) unfavorable changes in the economic environment impacting our industry, including inflation and interest rates, and iv) a sustained lower share price.

The income tax provisions reflect an effective tax rate of negative 0.1% in the third quarter of 2024, as compared to 32.6% in the third quarter of fiscal year 2023. The rate for the quarter was primarily due to the impairment of non-deductible goodwill. The non-GAAP adjusted tax rate for the third quarter of 2024 was 26.2%.

Capital Allocation

The Company repurchased 0.3 million shares of our common stock for an aggregate cost of $15.1 million in the third quarter. As of the end of the third quarter, there was $195.0 million remaining under the Board-authorized stock buyback program.

On August 2, 2024, the Board of Directors declared a cash dividend of $0.44 per share, to be paid on September 19, 2024, to shareholders of record as of the close of business on August 30, 2024.

Guidance & Outlook Updates

Based on the year to date actual results and updated assumptions for the remainder of the year, the company’s updated expectations for the fiscal year ending September 29, 2024 include the following:

FY 2024 Company-wide Guidance

• Adjusted EBITDA of $320-$325 million
• Operating EPS of $6.10-$6.25
• SG&A (excluding COLI gains/losses) of approximately $160 million

FY 2024 Jack in the Box Segment Guidance

• Same Store Sales of approximately (1.0%)
• Company-Owned Restaurant Level Margin of approximately 22%

FY 2024 Del Taco Segment Guidance

• Same Store Sales of approximately (1.5%)
• Company-Owned Restaurant Level Margin of approximately 14%

Conference Call

The Company will host a conference call for analysts and investors on Tuesday, August 6, 2024, beginning at 2:00 p.m. PT (5:00 p.m. ET). The call will be webcast live via the Investors section of the Jack in the Box company website at http://investors.jackinthebox.com. A replay of the call will be available through the Jack in the Box Inc. corporate website for 21 days. The call can be accessed via phone by dialing (888) 596-4144 and using ID 7573961.

About Jack in the Box Inc.

Jack in the Box Inc. (NASDAQ: JACK), founded and headquartered in San Diego, California, is a restaurant company that operates and franchises Jack in the Box^®, one of the nation's largest hamburger chains with approximately 2,200 restaurants across 23 states, and Del Taco^®, the second largest Mexican-American QSR chain by units in the U.S. with approximately 600 restaurants across 17 states. For more information on both brands, including franchising opportunities, visit www.jackinthebox.com and www.deltaco.com.

Category: Earnings

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements may be identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “goals,” “guidance,” “intend,” “plan,” “project,” “may,” “will,” “would” and similar expressions. These statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate. These estimates and assumptions involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. Factors that may cause our actual results to differ materially from any forward-looking statements include, but are not limited to: the success of new products, marketing initiatives and restaurant remodels and drive-thru enhancements; the impact of competition, unemployment, trends in consumer spending patterns and commodity costs; the company’s ability to achieve and manage its planned growth, which is affected by the availability of a sufficient number of suitable new restaurant sites, the performance of new restaurants, risks relating to expansion into new markets and successful franchise development; the ability to attract, train and retain top-performing personnel, litigation risks; risks associated with disagreements with franchisees; supply chain disruption; food-safety incidents or negative publicity impacting the reputation of the company's brand; increased regulatory and legal complexities, risks associated with the amount and terms of the securitized debt issued by certain of our wholly owned subsidiaries; and stock market volatility. These and other factors are discussed in the company’s annual report on Form 10-K and its periodic reports on Form 10-Q filed with the Securities and Exchange Commission, which are available online at http://investors.jackinthebox.com or in hard copy upon request. The company undertakes no obligation to update or revise any forward-looking statement, whether as the result of new information or otherwise.

JACK IN THE BOX INC. AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

The following table presents certain income and expense items included in our condensed consolidated statements of earnings as a percentage of total revenues, unless otherwise indicated. Percentages may not add due to rounding.

JACK IN THE BOX INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP MEASUREMENTS TO GAAP RESULTS

(Unaudited)

To supplement the condensed consolidated financial statements, which are presented in accordance with GAAP, the company uses the following non-GAAP measures: Adjusted Net Income, Operating Earnings Per Share, Adjusted EBITDA, Restaurant-Level Margin and Franchise-Level Margin. Management believes that these measurements, when viewed with the company's results of operations in accordance with GAAP and the accompanying reconciliations in the tables below, provide useful information about operating performance and period-over-period changes, and provide additional information that is useful for evaluating the operating performance of the company's core business without regard to potential distortions.

Operating Earnings Per Share

Operating Earnings Per Share represents diluted earnings per share on a GAAP basis excluding acquisition, integration and strategic initiatives, net COLI gains, pension and post-retirement benefit costs, goodwill impairment, losses (gains) on the sale of company-operated restaurants, excess tax (benefits) shortfall from share-based compensation arrangements, and the tax-related impacts of the above adjustments. Operating Earnings Per Share should be considered as a supplement to, not as a substitute for, analysis of results as reported under U.S. GAAP or other similarly titled measures of other companies. Management believes Operating Earnings Per Share provides investors with a meaningful supplement of the company’s operating performance and period-over-period changes without regard to potential distortions.

Below is a reconciliation of Non-GAAP Adjusted Net Income to the most directly comparable GAAP measure of net income. Also below is a reconciliation of Non-GAAP Operating Earnings Per Share to the most directly comparable GAAP measure, diluted earnings per share:

Adjusted EBITDA

Adjusted EBITDA represents net earnings on a GAAP basis excluding income taxes, interest expense, net, losses (gains) on the sale of company-operated restaurants, other operating expenses (income), net, goodwill impairment, depreciation and amortization, amortization of cloud computing costs, amortization of favorable and unfavorable leases and subleases, net, amortization of franchise tenant improvement allowances and other, net COLI gains, and pension and post-retirement benefit costs. Adjusted EBITDA should be considered as a supplement to, not as a substitute for, analysis of results as reported under U.S. GAAP or other similarly titled measures of other companies. Management believes Adjusted EBITDA is useful to investors to gain an understanding of the factors and trends affecting the company's ongoing cash earnings, from which capital investments are made and debt is serviced.

Below is a reconciliation of non-GAAP Adjusted EBITDA to the most directly comparable GAAP measure, net earnings (in thousands):

Restaurant-Level Margin

Restaurant-Level Margin is defined as company restaurant sales less restaurant operating costs (food and packaging, labor, and occupancy costs) and is neither required by, nor presented in accordance with GAAP. Restaurant-Level Margin excludes revenues and expenses of our franchise operations and selling, general, and administrative expenses. Certain other costs, such as depreciation and amortization, goodwill impairment, other operating expenses (income), net, losses (gains) on the sale of company-operated restaurants, and other costs that are considered normal operating costs are excluded as they are considered corporate-level shared service costs. As such, Restaurant-Level Margin is not indicative of the overall results of the company and does not accrue directly to the benefit of shareholders because of the exclusion of corporate-level expenses. Restaurant-Level Margin should be considered as a supplement to, not as a substitute for, analysis of results as reported under GAAP or other similarly titled measures of other companies. The company is presenting Restaurant-Level Margin because it believes that it provides a meaningful supplement to net earnings of the company's core business operating results, as well as a comparison to those of other similar companies. Management utilizes Restaurant-Level Margin as a key performance indicator to evaluate the profitability of company-operated restaurants.

Below is a reconciliation of non-GAAP Restaurant-Level Margin to the most directly comparable GAAP measure, earnings from operations (in thousands):

Franchise-Level Margin

Franchise-Level Margin is defined as franchise revenues less franchise operating costs (occupancy expenses, advertising contributions, and franchise support and other costs) and is neither required by, nor presented in accordance with GAAP. Franchise-Level Margin excludes revenue and expenses of our company-operated restaurants and selling, general, and administrative expenses. Certain other costs, such as depreciation and amortization, goodwill impairment, other operating expenses (income), net, losses (gains) on the sale of company-operated restaurants, and other costs that are considered normal operating costs are excluded as they are considered corporate-level shared service costs. As such, Franchise-Level Margin is not indicative of the overall results of the company and does not accrue directly to the benefit of shareholders because of the exclusion of corporate-level expenses. Franchise-Level Margin should be considered as a supplement to, not as a substitute for, analysis of results as reported under GAAP or other similarly titled measures of other companies. The company is presenting Franchise-Level Margin because it believes that it provides a meaningful supplement to net earnings of the company's core business operating results, as well as a comparison to those of other similar companies. Management utilizes Franchise-Level Margin as a key performance indicator to evaluate the profitability of our franchise operations.

Below is a reconciliation of non-GAAP Franchise-Level Margin to the most directly comparable GAAP measure, earnings from operations (in thousands):

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