Jack in the Box Inc. Reports Fourth Quarter and Full-Year 2022 Earnings

Jack in the Box same-store sales of +4.0% in Q4 2022, +0.9% for FY 2022

Del Taco same-store sales of +5.2% in Q4 2022, +3.9%⁽¹⁾ for FY 2022

Systemwide sales of +4.1%⁽²⁾ for Jack in the Box and +4.2%⁽²⁾ for Del Taco in Q4 2022

Jack in the Box to open 25-30 restaurants, expects positive net unit growth in FY 2023

Jack in the Box completes refranchising of Nashville and Oregon evolving market restaurants, with development commitments for 42 new restaurants

Management provides company-wide and brand-specific annual guidance measures for FY 2023

SAN DIEGO, November 22, 2022--(BUSINESS WIRE)--Jack in the Box Inc. (NASDAQ: JACK) announced financial results for the Jack in the Box and Del Taco segments in the fourth quarter, ended October 2, 2022.

"I am very pleased with the momentum of our top line performance to close 2022, which we have seen continue into the first several weeks of Q1, and the consistency we showed throughout the year in driving sales and improving traffic, as we continue to remain careful on the price we are taking to maintain a consistent value equation for our guests," said Darin Harris, Jack in the Box chief executive officer. "We continue to navigate operational headwinds, but Jack and Del Taco franchisees and operators showed their ability to be resilient and manage through them effectively all throughout 2022. While we will continue to attack the inflationary impact on margins, our top line fundamentals, operational focus, and expectation for positive net unit growth for Jack all demonstrate that 2023 will be a big year for our company and another positive step in the transformation of the Jack brand. The investments we are making in digital, technology and training, plus the continued integration and refranchising of Del Taco, have me enthusiastic for our future."

Jack in the Box Performance

Same-store sales increased 4.0% in the fourth quarter, comprised of an increase in Company-operated same-store sales of 11.4% and an increase in franchise same-store sales of 3.2%. Higher average check, driven mostly by pricing, and an increase in traffic drove the increase for company-operated while higher average check was partially offset by a decrease in traffic for franchise. Systemwide sales⁽²⁾ for the fourth quarter increased 4.1%.

As of the fourth quarter, and since the launch of the development program in mid-2021, the Company currently has 68 signed agreements for a total of 267 new restaurants. Under these agreements, 22 restaurants have opened, leaving 245 remaining for future development. Net restaurant count was down 26 in the fourth quarter, with 7 franchise openings and 33 restaurant closures. Most of these closures were related to one-time and strategic factors such as Evolving Markets and portfolio optimization within the St. Louis market as it exited bankruptcy process. The 33 restaurant closures included 10 Company-operated restaurants as part of refranchising Evolving Markets, 22 with an early termination including 10 in the St. Louis market, and one franchise location with an agreement expiration.

Restaurant-Level Margin⁽³⁾, a non-GAAP measure, was 16.2%, a decline from a year ago driven by increases in food and packaging costs; wage inflation of 11.3%; and increases in utilities and maintenance and repair costs, partially offset by menu price increases. Commodity costs increased in the quarter by approximately 14.9%, primarily due to increases in proteins, sauces and oil. When removing the temporary Evolving Markets, Restaurant-Level Margin was 19.5% for the quarter. During the fourth quarter, the Company completed the refranchising of two restaurants within the Nashville market, which also included four restaurant closures. This will remove all Nashville locations from the Evolving Markets portfolio beginning in Q1 2023, and also included development agreements for the first new franchisee for Jack in the Box in nearly a decade to open 7 restaurants in Baton Rouge, 16 restaurants in the Carolinas, and 14 in the Nashville area.

Franchise-Level Margin⁽³⁾, a non-GAAP measure, was 42.4%, an increase from a year ago, driven by higher same-store sales as well as higher early termination fees in the current year.

Jack in the Box Same-Store Sales:
		12 Weeks Ended		13 Weeks Ended		52 Weeks Ended		53 Weeks Ended
		October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021
Company		11.4%		(4.4)%		3.7%		6.1%
Franchise		3.2%		0.6%		0.6%		10.7%
System SSS		4.0%		0.1%		0.9%		10.3%

Jack in the Box Restaurant Counts:
		2022									2021
		Company			Franchise			Total			Company			Franchise			Total
Store count at beginning of Q4		171			2,036			2,207			148			2,071			2,219
New		—			7			7			—			4			4
Acquired from franchisees		—			—			—			16			(16	)		—
Refranchised		(15	)		15			—			—			—			—
Closed		(10	)		(23	)		(33	)		(1	)		(4	)		(5	)
Store count at end of Q4		146			2,035			2,181			163			2,055			2,218
Q4 Net Unit Decrease		(25	)		(1	)		(26	)
Q4/FY 2022 vs. Q4/FY 2021 Unit % Decrease		(10.4	)%		(1.0	)%		(1.7	)%

Del Taco Performance⁽¹⁾

Systemwide sales⁽²⁾ for the fiscal fourth quarter increased 4.2% driven by positive results in both franchise and company-operated same-store sales. Same-store sales increased 5.2% in the fourth quarter, comprised of franchise same-store sales growth of 6.4% and Company-operated same-store sales growth of 4.1%. Sales performance was boosted by the successful launch of the Epic Tortas platform, the 20 Under $2 value menu, higher average ticket and menu price, partially offset by menu mix and transaction declines. Del Taco had a fourth quarter net restaurant decrease of three restaurants, comprised of one company-operated closure and two franchise closures.

Restaurant-Level Margin, a non-GAAP measure, was 15.9% while Franchise-Level Margin, a non-GAAP measure, was 42.5%.

Del Taco Same-Store Sales(1):
		12 Weeks Ended
		October 2, 2022		October 3, 2021
Company		4.1%		0.7%
Franchise		6.4%		1.8%
System		5.2%		1.2%

Del Taco Restaurant Counts(1):
		2022									2021
		Company			Franchise			Total			Company			Franchise			Total
Restaurant count at beginning of Q4		291			303			594			298			305			603
New		—			—			—			—			1			1
Closed		(1	)		(2	)		(3	)		(2	)		—			(2	)
Restaurant count at end of Q4		290			301			591			296			306			602
Q4 Net Restaurant Decrease		(1	)		(2	)		(3	)
Q4 2022 vs. Q4 2021 Restaurant % Decrease		(2.0	)%		(1.6	)%		(1.8	)%

Company-Wide Performance

Fourth quarter diluted earnings per share was $2.17. Operating Earnings Per Share⁽⁴⁾, a non-GAAP measure, was $1.33 in the fourth quarter of fiscal 2022 compared with $1.73 in the prior year quarter. Fourth quarter operating EPS was negatively impacted by the 53rd week in 2021 by $0.12. Total revenues increased 44.6% to $402.8 million, compared to $278.5 million in the prior year quarter.

Net earnings increased to $45.9 million for the fourth quarter of fiscal 2022, compared with $38.9 million for the fourth quarter of fiscal 2021.

Adjusted EBITDA⁽⁵⁾, a non-GAAP measure, was $77.9 million in the fourth quarter of fiscal 2022 compared with $74.3 million for the prior year quarter.

SG&A expense for the fourth quarter, which now includes Del Taco, was $37.5 million, an increase of $16.4 million compared to the prior year quarter, driven primarily by mark-to-market changes in the cash surrender value of company owned life insurance ("COLI") policies, net of changes in our deferred compensation obligation supported by these policies, resulting in a year-over-year increase of $2.9 million, an increase of $2.3 million in incentive compensation and an increase of $13.3 million from the acquisition of Del Taco; partially offset by a decrease in litigation matters of $2.7 million and the 53rd week in the prior year of $1.8 million.

The effective tax rate for the fourth quarter of fiscal year 2022 was 29.1% compared to 25.4% in fiscal year 2021. The year-over-year increase in tax rate was primarily driven by non-deductible COLI losses in the current year as opposed to non-taxable gains in the prior year. The full year effective tax rate was 28.5%.

(1)		Del Taco same-store sales on a two-year basis and all prior year comparisons are pro forma and based on the time period of Jack in the Box’s full two-year fiscal calendar. We believe Del Taco's information on this time period is useful to investors as they have a direct effect on the company's profitability.
(2)		Systemwide sales growth is computed using a 52-week prior year fiscal calendar for comparative purposes.
(3)		Restaurant-Level Margin and Franchise-Level Margin are non-GAAP measures. These non-GAAP measures are reconciled to earnings from operations, the most comparable GAAP measure, in the attachment to this release. See "Reconciliation of Non-GAAP Measurements to GAAP Results."
(4)		Operating Earnings Per Share represents diluted earnings per share on a GAAP basis of $2.17 excluding acquisition, integration, and restructuring costs of $0.04; COLI losses (gains), net of $0.20; refranchising gains of ($0.08); and gains on sale of real estate to franchisees of ($1.01). See "Reconciliation of Non-GAAP Measurements to GAAP Results." Operating earnings per share may not add due to rounding.
(5)		Adjusted EBITDA represents net earnings on a GAAP basis excluding income taxes, interest expense, net, gains or losses on the sale of company-operated restaurants, other operating expenses (income), net, depreciation and amortization, the amortization of favorable and unfavorable leases and subleases, net and the amortization of franchise tenant improvement allowances and incentives. See "Reconciliation of Non-GAAP Measurements to GAAP Results."

Capital Allocation

The company repurchased 0.3 million shares of our common stock for an aggregate cost of $25.0 million in the fourth quarter. As of October 2, 2022, there was $175.0 million remaining amount under the Board-authorized stock buyback program. In addition to a previously announced one-time legal settlement, paying down debt and continuing to invest in the growth of the business, the company plans to execute up to $50 million in share repurchases in FY 2023.

On November 18, 2022, the Board of Directors declared a cash dividend of $0.44 per share, to be paid on December 22, 2022 to shareholders of record as of the close of business on December 7, 2022. Future dividends will be subject to approval by our Board of Directors.

Guidance & Outlook

The following guidance and underlying assumptions reflect the company’s current expectations for the current fiscal year ending October 1, 2023:

Company-wide Guidance

• FY 2023 CapEx & Other Investments Guidance of $75-90 million

  • Capital expenditures (located within cash flows from investing activities)

  • Franchise tenant improvement allowances and incentives (located within cash flows from operating activities)

• FY 2023 SG&A Guidance of $160-170 million

  • Excludes net COLI gains/losses, and now includes selling/advertising expense

  • Synergies from the Del Taco acquisition are not all direct reductions to expense, and appear in other areas of the P&L and margins, including store-level franchisee margins

  • Areas of cost mitigation include Restaurant Level Margin, Franchise Level Margin, Purchasing, Reduced Commodity Inflation, Marketing Activity and Spend

  • Does not include anticipated Del Taco refranchising savings

• FY 2023 Company-owned Commodity Guidance up 9-11% vs. 2022

• FY 2023 Company-owned Wage Rate Guidance up 3-6% vs. 2022

• FY 2023 Operating EPS Guidance of $5.25-5.65, includes Unique and One-time Items of Note

  • $0.08 negative impact associated with the reduction in rental revenue from real estate sales (additional detail below in Real Estate Sales section)

  • $0.22 negative impact associated with store-level technology investments (additional detail below in Franchise Level Margin section)

  • As mentioned within Capital Allocation section, the company plans to execute up to $50 million in share repurchases in FY 2023

  • Excludes any dilutive impact from refranchising Del Taco restaurants, and we will provide updates throughout the year as this initiative progresses

• Further Detail on Real Estate Sales

  • Jack in the Box has identified real estate assets in its portfolio that, due to current cap rates, can be monetized at more attractive valuations than the current trading multiple. The company can use the net proceeds from these real estate transactions to pay down debt, provide additional liquidity or other corporate purposes including investments in growth initiatives and potential share repurchases

  • For planned real estate sales of franchised properties, there is a reduction in rental revenue partially offset by a modest reduction in occupancy expense

  • Given trends in interest rates, this is a limited opportunity for the company in the near term

  • In total, there is an anticipated $2.2 million impact on adjusted EBITDA and an expected $0.08 negative impact on Operating EPS associated with the reduction in rental revenue

• Further Detail on Del Taco Refranchising

  • Cypress Group is currently assisting with refranchising of Del Taco locations with three main intentions. First, to create a company-wide asset-light model that will benefit from mitigating exposure to macroeconomic pressures; second, to generate incremental development agreements throughout the refranchising process that provide for a more robust unit growth pipeline than otherwise achievable; and third, a more efficient G&A structure

  • Our objective is to be asset light as we navigate market forces in the near term – and we will adjust the rate, pace and sequence of refranchising efforts to balance impact to earnings, as we await accelerated new unit openings from incremental development agreements and natural G&A reductions

  • We will provide updates throughout 2023, and plan to execute deals with existing Jack in the Box franchisees early in the year – as well as assess further deals patiently to ensure we maximize development potential as well as transaction value

Brand Segment Guidance

• Jack in the Box expects positive net unit growth in 2023, led by 25-30 gross openings

• Del Taco expects 8-12 gross openings in 2023

• FY 2023 Same Store Sales of Low Single Digits for both Jack in the Box and Del Taco

• FY 2023 Restaurant Level Margin Outlook

  • Jack in the Box Restaurant Level Margin is expected to be 18-20%, which includes high single digit price increases and is impacted negatively by 125 bps due to the remaining Evolving Markets

  • Del Taco Restaurant Level Margin is expected to be 14-16%, which includes high single digit price increases

• FY 2023 Franchise Level Margin Outlook

  • Jack in the Box Franchise Level Margin is expected to be 40-41%, which includes digital and restaurant level technology investments such as a new POS system as well as other technology platforms and applications to support future sales growth, operations and unit-level profitability. These investments are expected to pressure Operating EPS by $0.22 in FY 2023.

  • Del Taco Franchise Level Margin is expected to be ~41%

Conference Call

The Company will host a conference call for analysts and investors on Tuesday, November 22, 2022, beginning at 10:00 a.m. PT (1:00 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) 330-2508 and using ID 4115265.

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 more than 2,180 restaurants across 21 states, and Del Taco®, the second largest Mexican-American QSR chain by units in the U.S. with approximately 600 restaurants across 15 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
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
		12 Weeks Ended				13 Weeks Ended				52 Weeks Ended				53 Weeks Ended
		October 2, 2022				October 3, 2021				October 2, 2022				October 3, 2021
Revenues:
Company restaurant sales		$	214,474			$	95,634			$	701,070			$	387,766
Franchise rental revenues			80,668				84,386				340,391				346,634
Franchise royalties and other			56,906				49,264				216,821				204,725
Franchise contributions for advertising and other services			50,725				49,170				209,801				204,545
			402,773				278,454				1,468,083				1,143,670
Operating costs and expenses, net:
Food and packaging			66,182				29,630				216,345				113,006
Payroll and employee benefits			70,249				30,306				232,250				119,033
Occupancy and other			43,701				16,456				135,803				61,743
Franchise occupancy expenses			51,411				52,016				215,609				214,913
Franchise support and other costs			3,796				3,716				16,490				13,052
Franchise advertising and other services expenses			53,308				51,361				218,272				210,328
Selling, general and administrative expenses			37,549				21,128				130,823				81,959
Depreciation and amortization			15,346				10,844				56,100				46,500
Pre-opening costs			480				450				1,110				775
Other operating expense (income), net			(21,450	)			(5,080	)			889				(3,382	)
Gains on the sale of company-operated restaurants			(2,218	)			(1,124	)			(3,878	)			(4,203	)
			318,354				209,703				1,219,813				853,724
Earnings from operations			84,419				68,751				248,270				289,946
Other pension and post-retirement expenses, net			70				203				303				881
Interest expense, net			19,704				16,338				86,075				67,458
Earnings before income taxes			64,645				52,210				161,892				221,607
Income taxes			18,787				13,276				46,111				55,852
Net earnings		$	45,858			$	38,934			$	115,781			$	165,755
Net earnings per share:
Basic		$	2.17			$	1.81			$	5.46			$	7.40
Diluted		$	2.17			$	1.80			$	5.45			$	7.37
Weighted-average shares outstanding:
Basic			21,110				21,537				21,195				22,402
Diluted			21,162				21,594				21,245				22,478
Cash dividends declared per common share		$	0.44			$	0.44			$	1.76			$	1.68

JACK IN THE BOX INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
		October 2, 2022				October 3, 2021
ASSETS
Current assets:
Cash		$	108,890			$	55,346
Restricted cash			27,150				18,222
Accounts and other receivables, net			103,803				74,335
Inventories			5,264				2,335
Prepaid expenses			16,095				12,682
Current assets held for sale			17,019				1,692
Other current assets			4,772				4,346
Total current assets			282,993				168,958
Property and equipment, at cost:
Land			86,134				105,393
Buildings			960,984				907,792
Restaurant and other equipment			163,527				112,959
Construction in progress			18,271				6,894
			1,228,916				1,133,038
Less accumulated depreciation and amortization			(810,752	)			(810,124	)
Property and equipment, net			418,164				322,914
Other assets:
Operating lease right-of-use assets			1,332,135				934,066
Intangible assets, net			12,324				470
Trademarks			283,500				—
Goodwill			366,821				47,774
Deferred tax assets			—				51,517
Other assets, net			226,569				224,438
Total other assets			2,221,349				1,258,265
		$	2,922,506			$	1,750,137
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current maturities of long-term debt		$	30,169			$	894
Current operating lease liabilities			171,311				150,636
Accounts payable			66,271				29,119
Accrued liabilities			253,932				148,417
Total current liabilities			521,683				329,066
Long-term liabilities:
Long-term debt, net of current maturities			1,799,540				1,273,420
Long-term operating lease liabilities, net of current portion			1,165,097				809,191
Deferred tax liabilities			37,684				—
Other long-term liabilities			134,694				156,342
Total long-term liabilities			3,137,015				2,238,953
Stockholders’ deficit:
Preferred stock $0.01 par value, 15,000,000 shares authorized, none issued			—				—
Common stock $0.01 par value, 175,000,000 shares authorized, 82,580,599 and 82,536,059 issued, respectively			826				825
Capital in excess of par value			508,323				500,441
Retained earnings			1,842,947				1,764,412
Accumulated other comprehensive loss			(53,982	)			(74,254	)
Treasury stock, at cost, 61,799,221 and 61,523,475 shares, respectively			(3,034,306	)			(3,009,306	)
Total stockholders’ deficit			(736,192	)			(817,882	)
		$	2,922,506			$	1,750,137

JACK IN THE BOX INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
		52 Weeks Ended				53 Weeks Ended
		October 2, 2022				October 3, 2021
Cash flows from operating activities:
Net earnings		$	115,781			$	165,755
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization			56,100				46,500
Amortization of franchise tenant improvement allowances and incentives			4,446				3,450
Amortization of debt issuance costs			5,496				5,595
Loss on extinguishment of debt			7,700				0
Tax deficiency (excess tax benefits) from share-based compensation arrangements			123				(1,160	)
Deferred income taxes			7,857