Janus Henderson Sustainable & Impact Core Bond ETF Q3 2025 Earnings Report

Janus Henderson Sustainable & Impact Core Bond ETF EPS Results

• Actual EPS: $1.02
• Consensus EPS: $1.16
• Beat/Miss: Missed by -$0.14
• One Year Ago EPS: $1.65

Janus Henderson Sustainable & Impact Core Bond ETF Revenue Results

• Actual Revenue: $332.99 million
• Expected Revenue: $340.65 million
• Beat/Miss: Missed by -$7.67 million
• YoY Revenue Growth: -9.80%

Janus Henderson Sustainable & Impact Core Bond ETF Announcement Details

• Quarter: Q3 2025
• Date: 8/6/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, August 6, 2025
• Conference Call Time: 5:00PM ET

Jack in the Box Inc. operates and franchises Jack in the Box and Del Taco quick-service restaurants in the United States. The company was founded in 1951 and is headquartered in San Diego, California.

Janus Henderson Sustainable & Impact Core Bond ETF Q3 2025 Earnings Call Transcript

Key Takeaways

• Negative Sentiment: Third quarter system same-store sales at Jack in the Box fell 7.1%, driven by a pullback from Hispanic and lower-income consumers amid a difficult macro environment.
• Positive Sentiment: Management is investing an additional $5.5 million in Q4 marketing to support value offerings like the reintroduced Bonus Jack combo, hot honey spicy chicken strips, loaded potato wedges, and Coca-Cola Starlight munchie meals.
• Positive Sentiment: The company is refocusing on service quality and operational excellence through its new 'Jack’s Way' strategy and the return of COO Shannon McKinney to improve consistency, training, and accountability across restaurants.
• Positive Sentiment: Digital sales reached 18.5% of Jack brand revenue and over 2,000 restaurants now have the new POS system installed ahead of schedule, with full rollout expected by month-end, paving the way for further technology enhancements.
• Neutral Sentiment: Under the Jack on Track plan, 13 underperforming Jack restaurants closed in Q3 with 80-120 planned by calendar year-end and at least $100 million of real estate sales targeted, while the Del Taco strategic review is expected to conclude by year-end.

Presentation

[Operator]

Hello, and thank you for standing by. My name is Lacey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Jack in the Box Third Quarter twenty twenty five Earnings Webcast. All lines have been placed on mute to prevent background noise. After the speakers' remarks, there will be a question and answer session.

[Operator]

Thank you. I would now like to turn the conference over to Rachel Webb, Vice President of Finance and Investor Relations. You may begin.

[Rachel Webb, VP - Finance & IR at Jack in the Box]

Thanks, operator, and good afternoon, everyone. We appreciate you joining today's conference call highlighting results from our third quarter twenty twenty five. With me today are Chief Executive Officer, Lance Tucker and our Chief Financial Officer, Dawn Hooper. Following their prepared remarks, we will be happy to take questions from our covering sell side analysts. During both our discussion and Q and A, we may refer to certain non GAAP items.

[Rachel Webb, VP - Finance & IR at Jack in the Box]

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 these 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 ks to be part of our discussion. Material risk factors as well as information relating to company operations are detailed in our most recent 10 ks, 10 Q and other public documents filed with the SEC and are available on our Investor Relations website.

[Rachel Webb, VP - Finance & IR at Jack in the Box]

With that, I would like to turn the call over to our Chief Executive Officer, Lance Tucker.

[Lance Tucker, CEO & Director at Jack in the Box]

Thanks, Rachel, and I appreciate everyone joining us today. As I've now been back with Jack in the Box for six months, I'd like to take a moment to share my observations thus far. Despite the last six months being some of the most challenging I can recall in my time in the QSR industry, I've been struck by the energy, passion and grit that I've seen from our teams and our franchisees at both Jack in the Box and Del Taco, giving me even greater confidence that we can and will leverage the many equities at both brands to deliver strong long term results for our franchisees and investors. I continue to be grateful for the opportunity to lead such an amazing group of people as we work to drive these brands forward. Another reason for my confidence is the excitement generated by our recent entrance in the new markets, highlighting the relevance and potential of both brands.

[Lance Tucker, CEO & Director at Jack in the Box]

Back in the box, fantastic new market openings. Recently opened restaurants in Chicago while Del Taco entered the Durham, North Carolina market. In both cases, these restaurants are opening with very high volumes and are expected to be excellent performers. Want to thank the operations teams at both brands as well as our newly appointed Chief Development Officer, Van Ingram, and the entire development team for their contributions to these fantastic new market openings. Turning to third quarter results.

[Lance Tucker, CEO & Director at Jack in the Box]

There were several challenges we had to contend with during the quarter. As many in the QSR industry have already called out, the macro environment is very difficult and consumers remain cautious. Jack in the Box significantly over indexes with Hispanic guests who, especially in our core markets, face uncertainty and have pulled back their spending. This issue is having an outsized impact on our sales. In addition, we have seen lower income cohorts pull back as well, in line with industry trends.

[Lance Tucker, CEO & Director at Jack in the Box]

We're also contending with some difficult compares as we continue to lap successful Smashed Jack promotions from last year as well as significant price taken by many of our restaurants in 2024 as a result of California minimum wage increases. Both of these have negatively impacted check growth on a year over year basis. As I look at our Q3 results and what is needed to drive better sales performance in spite of the headwinds, we need to get back to our barbell strategy and more specifically provide more demonstrable value to our customers. So we're doing just that as we move through the fourth quarter. To start, last week we reintroduced our Bonus Jack combo, a fan favorite at a very compelling introductory price point.

[Lance Tucker, CEO & Director at Jack in the Box]

In addition, we have launched our popular spicy chicken strips featuring a new craveable hot honey flavor that really resonates with our core guests. Our always popular soft and loaded potato wedges are also back for a limited time. And to combat late night competition and help bolster some of the softness in check, we'll continue to pulse our munchie meals with culturally relevant collabs, including our current munchie meal featuring Coca Cola Starlight. As you can tell, our current lineup is strong, and we are investing $5,500,000 in incremental marketing across the fiscal fourth quarter to make sure we're fully supporting it. Part of this spend is to overcome the shortfall created by our sales performance in Q3, while the majority is to add media weight so our guests are fully aware of these craveable offerings.

[Lance Tucker, CEO & Director at Jack in the Box]

As I look longer term, the entire guest experience requires improvement in the coming months and years. Value equation has gotten a bit off track across the broader QSR industry, and Jack in the Box is no different. So we need to work on the entire guest experience, not just promotion or price. As such, we are refocusing on three key areas to enable staying power of the Jack brand. We'll do this by getting back to our roots and leaning on our seventy five year heritage by going back to doing things as we call it Jack's way.

[Lance Tucker, CEO & Director at Jack in the Box]

While Jack on Track is intended to quickly fortify the financial foundation for both the company and its franchisees, it is comprised of structural actions. It's not an actual operating plan. By contrast, Jack's Way will be our ongoing strategy for driving a better overall experience for our guests. First, doing things Jack's way means improving service quality and getting back to emphasizing operational excellence. In a sense, it's as simple as getting back to basics.

[Lance Tucker, CEO & Director at Jack in the Box]

Initially, this means delivering a better experience through improved guest interactions and focusing on consistent service quality across our core menu items from burgers to our fried offerings. It includes additional training and support for employees at both our restaurant and field levels, and it also includes holding our restaurants more accountable for performance and also rewarding them for outstanding work by reintroducing key recognition programs to motivate and recognize our team members in every restaurant. While operational changes don't impact sales overnight, we know these are table stakes for long term brand success. That's why we are thrilled to have Shannon McKinney back at Jack in the Box as our COO. Shannon has hit the ground running and is already building a great rapport with our team members and franchisees to improve our system wide operations.

[Lance Tucker, CEO & Director at Jack in the Box]

Second, doing things Jack's way means serving high quality food at a good value. Recently, we have missed the mark on delivering the value to our guests that they've come to expect. What I like the most about the rest of this year is the marketing lineup has a strong balance of innovation and ownable value that will keep guests coming back more often. In addition, we are entering Jack's seventy fifth anniversary in 2026. We are fully embracing the out of the box qualities that make Jack in the Box such a distinctive iconic brand.

[Lance Tucker, CEO & Director at Jack in the Box]

While I won't get into specifics, you'll see more innovation and improved quality across our core products as well as the return of some classic Jack throwback products our loyal fans have been asking for. You'll also see nods to Jack's history in our marketing, including a modern twist on iconic commercials from the brand's past that will feature Jack's irreverent, quirky personality in a way that we expect will really resonate. These improvements, coupled with the improved operations, will deliver that incredibly hot flavorful food our guests crave. The third key element of doing things Jack's Way is the modernization of our restaurants. We want our guests to enjoy a consistent experience from our mobile app all the way to the drive thru.

[Lance Tucker, CEO & Director at Jack in the Box]

The guest experience has suffered over the years as many of our restaurants have not received timely reimages. To remedy this, we intend to deploy a multiyear reimage initiative to touch at least 1,000 additional restaurants beyond our current program. We'll share more plans about this in November as part of our capital planning discussions, but please know I am committed to the revival of the Jack in the Box brand stores. Underlying all of our plans around an improved guest experience is a solid foundation in technology. The digital mix reached a total of 18.5% of sales for the Jack brand this quarter.

[Lance Tucker, CEO & Director at Jack in the Box]

We're pleased with the progress the teams have made in enabling our restaurants with technology, and we're well ahead of schedule in achieving our initial goal of 20% of sales through digital channels. I'm also pleased to announce that as of last week, over 2,000 restaurants now have the new point of sale system installed. I want to thank Doug Cook and the IT organization, our ops team, our vendor partners, and our franchisees for installing these ahead of schedule. It's been a true team effort. We anticipate the new POS will be fully rolled out to the entire JAK system by the end of this month.

[Lance Tucker, CEO & Director at Jack in the Box]

While we continue to see implementation impacts from temporary downtime, we anticipate these impacts will be short term in nature. And of note, the vast majority of issues we discussed last quarter related to our technology modernization have been mitigated. While there's been a lot of progress, we do still have a number of items on our technology roadmap. With future enhancements to our digital platforms, loyalty program, and data capabilities yet to come, there's a lot of long term upside from enabling our restaurants with better tech. Switching gears, Dawn will speak to the specifics regarding the Jack contract program and updates, but I am pleased with the progress we've made thus far.

[Lance Tucker, CEO & Director at Jack in the Box]

There are many puts and takes throughout the plan, and my commitment is to provide as much transparency as I can knowing timing will be challenging to predict on our end. Spend a moment on the balance sheet component of the program. We remain committed to reducing our leverage, but want to be very clear about why this is a priority. Jack in the Box has a very flexible existing securitization debt structure and is well over $100,000,000 from approaching its debt covenants, so our cash flow easily supports our debt. We simply feel it is prudent to operate with more modest leverage as we move forward and we also want to mitigate increases in our interest expense as we begin to refinance the various tranches in this higher interest rate environment.

[Lance Tucker, CEO & Director at Jack in the Box]

And lastly, while there are certainly a lot of activities occurring at Jack in the Box, I want to make it very clear that my number one priority is improving performance at our restaurants to ensure long term health across the system now and for years to come. Before I pass it over to Dawn, I want to take a moment to acknowledge Dawn's much deserved promotion to Chief Financial Officer. The stability, consistency and over twenty years of Jack knowledge she provides gives me great confidence in her ability to drive shareholder value. Now I'll turn the call over to her for her prepared remarks, after which we'll take your questions. Dawn?

[Dawn Hooper, EVP & CFO at Jack in the Box]

Thanks, Lance, and good afternoon, everyone. I will start by reviewing our two brands individually followed by details on our consolidated performance and capital allocation as well as update guidance. Starting with our Jack brand, the third quarter system same store sales decreased 7.1% comprised of a franchise restaurant same store sales decrease of 7.2% and a company owned same store sales decrease of 6.4%. This resulted from a decrease in transactions and mix negativity, partially offset by many price increases. Now looking at restaurant level performance.

[Dawn Hooper, EVP & CFO at Jack in the Box]

Jack's restaurant level margin percentage in the quarter decreased to 17.9%, down from 21% a year ago, driven primarily by sales deleverage. Food and packaging costs as a percentage of sales were favorable in the quarter, declining 60 basis points from the prior year to 28.6. This was driven by an increase in beverage funding relating to a new contract and menu price increases, partially offset by commodity inflation of 4% in the quarter. Labor costs as a percentage of sales were 34.5%, increasing two twenty basis points from the prior year. This increase was primarily driven by a California unemployment payroll tax adjustment as well as wage inflation, which was 1.5% for the quarter.

[Dawn Hooper, EVP & CFO at Jack in the Box]

Wage inflation was relatively low for the quarter as we lapped the impacts at AB twelve twenty eight, and we expect wage inflation to be two to three percentage points on a go forward basis. Occupancy and other operating expenses increased 160 basis points driven primarily by sales deleverage and higher costs for rent, utilities, and other operating expenses. Franchise level margin was 66,200,000.0 or 39.3% of franchise revenues compared to $74,600,000 or 41.1% a year ago. The decrease in dollars was mainly driven by lower sales driving lower rent revenue and royalties, partially offset by franchise lease buyout transactions in the current year. Turning to restaurant count, there were six restaurant openings and 21 restaurant closures in the quarter, of which 13 were associated with our Jack on Track closure program.

[Dawn Hooper, EVP & CFO at Jack in the Box]

Turning now to Del Taco. System same store sales declined 2.6% with a franchise same store sales decline of 2.7% and a company owned same store sales decrease of 2.2%. The lower sales were the result of a decline in transactions and mix partially offset by an increase in price. Del Taco benefited from a strong value promotion in l big boxes and bolster check later in the quarter by adding a premium protein promotion in carnitas. All Del Taco company owned restaurants have kiosks installed, and we are continuing to see franchisees increasing their adoption rate as well.

[Dawn Hooper, EVP & CFO at Jack in the Box]

Including kiosks along with third party delivery and mobile, digital mix now makes up roughly 20% of system wide sales. Del Taco restaurant level margin was 9.7%, down three seventy basis points from the prior year. The margin percentage decline was driven primarily by lower sales and higher costs, including higher utilities, labor, and other operating costs as well as commodity inflation. Food and packaging costs as a percentage of sales increased 100 basis points to 26.6% due to unfavorable menu mix and commodity inflation of 4.7% in the quarter. Labor costs as a percentage of sales increased 100 basis points to 39.6% primarily due to higher insurance and a California unemployment payroll tax adjustment partially offset by wage deflation of 0.5% for the quarter.

[Dawn Hooper, EVP & CFO at Jack in the Box]

Occupancy and other operating expenses increased 170 basis points driven primarily by higher utility costs and other operating expenses. Franchise level margin was $6,400,000 or 27% of franchise revenues compared to $5,800,000 or 27.1% last year. The increase was driven by the benefit of refranchising, early termination fees, and lower IT costs, partially offset by negative sales and higher bad debt expense. Del Taco restaurant count at quarter end was 585 with three openings and nine closures during the quarter. Moving on now to our consolidated results.

[Dawn Hooper, EVP & CFO at Jack in the Box]

SG and A for the quarter was $26,800,000 or 8.1% of revenues as compared to $29,600,000 or 8% a year ago. The decrease of $2,700,000 was primarily due to fluctuations in the cash surrender value of our company owned life insurance policies, net of changes in our nonqualified deferred compensation obligation supported by these policies of $2,600,000 Lower incentive based compensation of $1,700,000 also contributed to the decrease. These decreases were partially offset by increases in insurance of 3,300,000 Excluding net COLI gains of $6,100,000 as well as advertising costs, G and A was 2.2% of total system wide sales for the quarter, and total G and A spend was $25,500,000 which is an increase of $1,000,000 versus the prior year. Consolidated adjusted EBITDA was $61,600,000 down from $78,900,000 in the prior year due primarily to the impacts from sales deleverage. We reported a consolidated GAAP diluted earnings per share for the third quarter of $1.15 compared to a net loss per share of $6.26 in the third quarter of the prior year. Operating earnings per share, which includes adjustments for certain items, was $1.02 for the quarter versus $1.65 in the third quarter of the prior year. The effective tax rate for the 2025 was negative 2.4% compared to a negative 0.1% for the same quarter a year ago.

[Dawn Hooper, EVP & CFO at Jack in the Box]

The lower tax rate in the current year was primarily driven by non taxable gains from the market performance of insurance products. The adjusted tax rate used to calculate the non GAAP operating earnings per share this quarter was 26.1%. On the investing front, our capital expenditures were 22,500,000 for the quarter and $70,300,000 on a year to date basis and included investments in our restaurant technology and digital initiatives as well as the development of new company restaurants. We did not repurchase any shares of stock during the quarter, and as previously announced, we discontinued our dividend. As of quarter end, we had available borrowing capacity of 96,500,000.0 under our variable funding notes, net of letters of credit issued.

[Dawn Hooper, EVP & CFO at Jack in the Box]

Our total debt outstanding at quarter end was 1,700,000,000.0, and our net debt to adjusted EBITDA leverage ratio was 5.7 times. I'd like to spend a few moments reiterating our Jack on Track plan elements and provide a progress update. As discussed during our April 23 call, our objective is to position Jack in the Box for long term sustainable growth. Reviewing the primary actions as part of this plan, I'll start with the restaurant block closure program. In q three, we closed 13 restaurants as part of this program. Five of these closures were company owned restaurants, and we don't anticipate any more company owned closures as part of the program. To give you more color on the roughly 200 restaurants in the Jack on Track closure program, we expect the profile of a restaurant to resemble the following. Average annual sales volumes of roughly 1,200,000.0 per restaurant, average annual four wall EBITDA of negative 70,000 restaurant, which has been a drag on our franchise operators. The average annual Jack in the Box contribution from rent and royalties to franchise level margin of 80,000 per restaurant.

[Dawn Hooper, EVP & CFO at Jack in the Box]

By closing these restaurants, we expect the health of our franchisees' overall portfolios to improve. We do expect there will be a sales transfer benefit to nearby restaurants, many of which are owned by the same franchise operator. Because we are closing these restaurants over a span of years, the total impact depends on restaurant closure dates. As announced in April, we are on track to close 80 to 120 restaurants by the end of calendar year 2025. The majority of these perform more poorly than the averages I just outlined.

[Dawn Hooper, EVP & CFO at Jack in the Box]

As it pertains to real estate sales, we did not sell any real estate in the third quarter. We do expect to sell real estate with proceeds of at least 100,000,000, most of which will occur within the next fiscal year. And for the last component of Jack on Track, the Del Taco strategic process, we have good interest and are progressing through the process. Ideally, we will have news to share with you by the end of this calendar year. Lastly, we have updated our outlook for the remainder of fiscal year 2025.

[Dawn Hooper, EVP & CFO at Jack in the Box]

These are updated from our April Jack on Track call. As a reminder, we do not include the impacts of future Jack on Track activities in these estimates. On a company wide basis, we expect total capital expenditures for the year of 85,000,000 to 90,000,000. We do not plan to repurchase any additional shares beyond the $5,000,000 that was repurchased in the first quarter. Our tax rate expectations remain the same at about 26%.

[Dawn Hooper, EVP & CFO at Jack in the Box]

We expect SG and A spend of 155,000,000 to $160,000,000 for the full year, which includes the $5,500,000 in incremental marketing spend in the fourth quarter that Lance mentioned, but does not include any COLI gains. We expect G and A as a percentage of system wide sales, also excluding COLI gains, to be roughly 2.3%. Depreciation and amortization are expected to be closer to 57,000,000 to $59,000,000 for the full year. We expect adjusted EBITDA of $270,000,000 to $275,000,000 which includes the 5,500,000.0 in incremental marketing spend in the fourth quarter. And we expect operating EPS of $4.55 to $4.73.

[Dawn Hooper, EVP & CFO at Jack in the Box]

For Jack in the Box specifically, we expect same store sales of negative low to mid single digits consistent with our expectations from April, 30 to 35 gross restaurant openings, and restaurant level margin of 19% to 21%. This includes the full year impact of AB twelve twenty eight as well as higher costs for utilities and low to mid single digit commodity inflation. We look forward to sharing our outlook for fiscal year twenty twenty six on our upcoming earnings call in November. In closing, we expect the Jack on Track program to set the groundwork to improve the long term financial performance of the company As we refocus on our customer experience from improving the value equation to modernizing the image of our restaurants, we expect to get back to Jack's way of delivering best in class results. We look forward to speaking with you again in November when we release the fourth quarter results and set expectations for fiscal twenty twenty six.

[Dawn Hooper, EVP & CFO at Jack in the Box]

Thanks again for your time this afternoon. Operator, please open the line for questions.

[Operator]

Your first question comes from the line of Brian Brittner with Oppenheimer. You may go ahead.

[Brian Bittner, Senior Equity Analyst - Restaurants at Oppenheimer & Co. Inc.]

Thanks. Good afternoon. Two questions. First, is the guidance for Jack in the Box same store sales down low to mid single digits for the fiscal year, it does imply a very wide range for the fourth quarter. So any help on the rate of change we should be expecting relative to 3Q's performance would be helpful, particularly given the incremental advertising you're deploying in 4Q, if you could kind of help us understand what that's going to be used for specifically?

[Lance Tucker, CEO & Director at Jack in the Box]

Sure, Brian. It's Lance. On Q4, what we're really doing is we're kind of pivoting to a little bit better value. So the first several weeks of the quarter were difficult because we were still in kind of the same window that we were coming out of Q3. But then when you look at what we've seen for just about the last couple of weeks since we rolled a new window, we've rolled out a very attractive price pointed combo in our Bonus Jack.

[Lance Tucker, CEO & Director at Jack in the Box]

We have also rolled out our spicy chicken strips with a with a really good new flavor in hot honey. We also are rolling out soft and loaded potato wedges, which is a fan favorite. We're bringing those back for a limited time. Continuing the pulse in munchie meals, which is one of our best performing products. And right now, we have a collab with Coca Cola Starlight.

[Lance Tucker, CEO & Director at Jack in the Box]

We're gonna put the media weight behind, mainly behind the Bonus Jack combo. And so again, that's price pointed. Think that's been a little bit of a miss for us. Throughout the quarter, we didn't have quite enough price pointed value. So as we look to Q4, what I'll tell you is that the first few weeks started off a little bit rough.

[Lance Tucker, CEO & Director at Jack in the Box]

The last couple of weeks, while it is still early, the trends have looked much improved. So we definitely think we're on the right track. And I think kind of the theme is going to be we probably need to be looking at a little more price point of value, a little more consistent value honestly and making sure it's visible by being on the menu board which we're also doing which we don't always do when we do an LTO.

[Brian Bittner, Senior Equity Analyst - Restaurants at Oppenheimer & Co. Inc.]

Okay. Thank you. And my follow-up is just on the Jack on Track strategy and specifically the real estate sales of potential $100,000,000 over the next fiscal year. How did you decide on that dollar amount figure without knowing the final result of the Del Taco strategic review? I was assuming that the Del Taco dynamic could have an impact on the amount of real estate sales you may have been targeting.

[Brian Bittner, Senior Equity Analyst - Restaurants at Oppenheimer & Co. Inc.]

So if you could just help us better understand the $100,000,000 and how that got constructed.

[Lance Tucker, CEO & Director at Jack in the Box]

Absolutely. And really the way you should think about that $100,000,000 is kind of an at least $100,000,000 The way I'm thinking we're going to use the real estate sales is really is the balancer, so very similar I think to what your expectation was as I heard you explain it. We'll see where the Del Taco process lands. We'll also see what cash we're able to accumulate. The other means a little bit less CapEx spend, etcetera, what our operating results look like, all those things.

[Lance Tucker, CEO & Director at Jack in the Box]

We know we'll want to sell at least $100,000,000 of real estate. And then beyond that, we'll kind of wait and see.

[Operator]

Your next question comes from the line of Gregory Francfort with Guggenheim. You may go ahead.

[Arian Razai, VP - Equity Research at Guggenheim Securities]

Hi. Good afternoon. This is Aryan Razai for Greg. Thanks for taking our questions. Lance, with Shannon McKinney coming back to Jack, what do think you can bring or change operationally?

[Arian Razai, VP - Equity Research at Guggenheim Securities]

And then I have a quick follow-up on income cohorts. Seems like seems like the low income consumer has been struggling for the last, I don't know, two two and a half years and the mid income consumer for the past six, eight months. Can you provide more color on what you're seeing at JAG within these two and how it tracks over the recent quarters? Thank you.

[Lance Tucker, CEO & Director at Jack in the Box]

Sure. So let me start with Shannon. So we are thrilled to have Shannon back. He used to be in the system a number of years ago in a senior role at that time too. And I think what you'll see Shannon bring back is a real focus on operations.

[Lance Tucker, CEO & Director at Jack in the Box]

And I guess to be a little bit more specific, and we mentioned this in some of our scripting, we're going to get back to the basics on some things that we can do that really we're falling a little bit short of. So even just things like friendliness, making sure some real basics are taken care of in our food prep. And then we're going to be holding our franchisees and ourselves as company operators more accountable as well. And so Shannon will be leading that charge. I can tell you just in the first month or so that he's been here, he's already been out in several of our major markets.

[Lance Tucker, CEO & Director at Jack in the Box]

He spent the last couple of weeks in 50 or 60 restaurants both in Texas and over on the East Coast. So he's been all over the place. He's going to bring that real field based leadership and being out there in the field a bit more really driving results. As it relates to income, and I'm going to start here and I'll ask Rhonda to jump in if he needs to, But we continue to see the low income consumer has been cautious even though the sentiment overall has gone up overall if you look at stats. That's not necessarily true of the low income consumer.

[Lance Tucker, CEO & Director at Jack in the Box]

So we're seeing a lot of the things that you see, I think, from other competitors, which is just that those folks continue to be cautious. But the midrange, maybe just a little bit less so, but not appreciably.

[Ryan Ostrom, EVP - Chief Customer & Digital Officer at Jack in the Box]

And I think the only thing to add in there is is as we have a higher propensity for the Hispanic communities, just just noting that we kinda got a little hit more by that and and really working on how we bring that customer back in as well.

[Arian Razai, VP - Equity Research at Guggenheim Securities]

That's helpful. Thank you so much.

[Operator]

Your next question comes from the line of Jon Tower with Citi. You may go ahead.

[Jon Tower, Director - Equity Research - Consumer & Restaurants at Citigroup]

Great. Thanks. I was just wondering maybe you could talk I know you're discussing the pivot to doing more value in the fourth quarter and you outlined a handful of the LTOs that are coming to Bonus Jack's Spicy Chicken Strips. I'm just curious how you can get the franchisees to buy into, say, a more consistent ongoing everyday value menu and messaging around that beyond these LTO windows. Is that one of the efforts that you're hoping to kind of pursue going forward?

[Jon Tower, Director - Equity Research - Consumer & Restaurants at Citigroup]

I think you're hitting on earlier, Lance, during the discussion that pricing has gotten a little out of hand, not only for you guys, but certainly the category. And there needs to be kind of a broader pivot to value. And LTOs work for a while, but then they come off the menu. So how are you getting them more aligned on an everyday basis?

[Lance Tucker, CEO & Director at Jack in the Box]

I think there's a couple of things I'd say, John. First of all, we're kind of taking a fresh look at our menu architecture, at the way our menu is built and our pricing overall. We're engaging a third party to actually help us do so. So I think the first thing is make sure we've got the menu constructed right. I think without going into too much detail, we are we don't have enough kind of entry level.

[Lance Tucker, CEO & Director at Jack in the Box]

If you think about a good, better, best structure, we don't have enough sitting in the good category. So we're looking at that. But as far as specifically how we get the franchisees on board, I think our franchisees, they understand the need to bring customers back in. Obviously, can tell that we haven't brought them in at the pace we would expect. And I think by really focusing on profitability and making sure we're balanced with when and where we do, add a little bit more value and make sure we're really sticking to that barbell approach where, yes, we do have the value that's going to bring that lower income consumer in, but we also have some of the higher end products that are going to keep the folks that are able to spend a little bit more coming in.

[Lance Tucker, CEO & Director at Jack in the Box]

That is how you get the franchisees on board. What franchisees don't want is everything discounting and just giving away a lot of food. The reality is they're fine to to bring people in, try to upsell them where they can. It's just got to be balanced and still got to be profitable transactions where they're concerned.

[Jon Tower, Director - Equity Research - Consumer & Restaurants at Citigroup]

Got it. And maybe just you hit on the idea of the menu architecture. Included in that, are you thinking about the size of the menu as well? Is that part of the discussion? Or is it more around just price and pricing architecture?

[Lance Tucker, CEO & Director at Jack in the Box]

I'll start with that one, and then I'll let Ryan jump in here on a couple of things. But I think we'll look at it. A lot of our brand equity, though, at Jack in the Box does come from our variety and the fact that we have twenty four hour breakfast and we have twenty four hour menu generally and you can get an egg roll or churros or tacos or things that you can't traditionally get elsewhere. So I think we do need to look and make sure we're being smart about our menu. But it is, you know, it's a difficult task at Jack in the Box simply because so much of the equity relies on variety.

[Lance Tucker, CEO & Director at Jack in the Box]

So it's making sure how do you keep as much variety out there on the menu for the for the guest while maybe trying to make it a little simpler on the back of the house. Ron, what am I missing there?

[Ryan Ostrom, EVP - Chief Customer & Digital Officer at Jack in the Box]

I think when you look at our menu, we look at our menu architecture, I think we have a really strong entry point value around munchies under four, but those are all a la carte items. And then we have our combos, which which are priced, you know, mainly $10 or more. So we're really trying to figure out how we create some ownable value on the menu in between that $4 price point and the $10 price point. And so that's where you see us really leverage creating some ownable value, but that's on the menu panel, which is what we haven't had for the past, two windows.

[Dawn Hooper, EVP & CFO at Jack in the Box]

We're ready for the next question. Lacey?

[Operator]

Your next question comes from the line of Teddy Forley with Goldman Sachs. You may go ahead.

[Teddy Farley, Equity Research Associate at Goldman Sachs]

Hi. Thanks for taking the question. You talked about it in broad terms, but would you mind giving the specifics on the same store sales breakout, for both Jack and Del Taco?

[Dawn Hooper, EVP & CFO at Jack in the Box]

Yeah. And this is gonna be we only give it for company restaurants. But for Jack company, same store sales were down 6.4%. That included trans down 6.6 and price of 2.2 with the balance of mix down two. And then on the Del Taco side, company was down 2.2, trans down 5.2, mix unfavorable 1%, and price up 4.1.

[Teddy Farley, Equity Research Associate at Goldman Sachs]

Awesome. Thank you.

[Dawn Hooper, EVP & CFO at Jack in the Box]

Yes.

[Operator]

Your next question comes from the line of Jim Sanderson with Northcoast Research. You may go ahead.

[Jim Sanderson, Equity Research Analyst at Northcoast Research]

Hey. Thanks for the question. I was hoping you could update us on average weekly sales trends in Salt Lake City and Lexington, Kentucky, and how they compare to the new store openings you've seen in Chicago to date.

[Lance Tucker, CEO & Director at Jack in the Box]

We won't give the exact numbers, Jim, but I can tell you Salt Lake continues to perform very strongly. In fact, it's Louisville, not Lexington, Kentucky. Again, it continues to be very strong. Chicago has opened in excess of where both of those are today and has been a very strong opening overall. Now, of course, you're only a few weeks into Chicago, but we do already have three restaurants up, we're actually going to have eight restaurants within about a two month period. So we're excited about the early returns on Chicago.

[Jim Sanderson, Equity Research Analyst at Northcoast Research]

All right. I had just one other follow-up question on your commentary regarding low income consumers and Hispanics. Can you provide any type of sense of what share of traffic those groups drive for Jack in the Box?

[Lance Tucker, CEO & Director at Jack in the Box]

I can tell you we significantly over index on the Hispanic consumer. And by that, I mean, at least 1.7 times kind of the general industry in some cases versus some of our major competitors is twice as high. The lower income consumer, we look more similar to the rest of the industry. So I can't give you the exact percentages of what they make up on our sales base, but that gives you a feel for how we compare our competition anyway.

[Operator]

Your next question comes from the line of Chris O'Cull with Stifel. You may go ahead.

[Ella Zhou, Equity Research Associate at Stifel Financial Corp]

Hi. This is Ella on for Chris. Thanks for the question. So if it was better than we would have expected with comps down 7% at Jack's, can you help us understand how sensitive Jack's restaurant margin is to like a 1% change in comp? And then I have a follow-up question.

[Lance Tucker, CEO & Director at Jack in the Box]

So relative to a one Dawn's gonna wanna look up the number here and give me some guidance. But so give us just one second while we while we kinda look at this.

[Dawn Hooper, EVP & CFO at Jack in the Box]

I'm sorry. Can you repeat your question just one more time?

[Ella Zhou, Equity Research Associate at Stifel Financial Corp]

Yes. So is that it was better than what we have expected with, like, comps down some percentage, which is more than what we projected. And we wanna understand how sensitive is the restaurant margin to one person changing pumps.

[Lance Tucker, CEO & Director at Jack in the Box]

Give us one sec here. So the

[Dawn Hooper, EVP & CFO at Jack in the Box]

It would be 10 basis points. It's on a 1% change in comp.

[Ella Zhou, Equity Research Associate at Stifel Financial Corp]

Great. And then is there a risk that the soft sales would impact timing or sequencing of the jack on track line?

[Lance Tucker, CEO & Director at Jack in the Box]

I'm so sorry. I'm having a hard time hearing you. If you could repeat that question, please?

[Ella Zhou, Equity Research Associate at Stifel Financial Corp]

I'm so sorry.

[Ella Zhou, Equity Research Associate at Stifel Financial Corp]

My question is, is there a risk that the soft sales impact the timing or sequencing of the jack on track plan?

[Lance Tucker, CEO & Director at Jack in the Box]

No, there really isn't. Certainly, we'd rather not be doing some of these things in a down sales environment. But with that said, the downturn certainly has not been so severe that it's impacting anything we're doing relative to the J. Contract program. And one thing that I would kind of remind the group is that with the closures happening over four to five years, that EBITDA impact is actually going to be leaked in over a number of years and there's going be some sales transfer.

[Lance Tucker, CEO & Director at Jack in the Box]

So once you get beyond that initial 80 to 120 closures, you're going to see the impact spread out over a fairly significant number of time. And similarly, the real estate sales, while they will have a little bit of an EBITDA impact, that will happen kind of throughout 2026. So there's nothing happening in the current environment that would slow down what we're doing for Jack on Track.

[Dawn Hooper, EVP & CFO at Jack in the Box]

And, Ella, I apologize. We misheard you, when you asked your initial question, and we'll follow-up with you on on the basis point change to restaurant level margin.

[Ella Zhou, Equity Research Associate at Stifel Financial Corp]

Great. Thank you so much.

[Operator]

Your final question comes from the line of Jake Bartlett with Truist Securities. You may go ahead.

[Jake Bartlett, Senior Equity Research Analyst at Truist Securities]

Great. Thanks for taking the question. Mine was on the operational improvements that you're targeting in the exact way. If you can just maybe frame the opportunity, meaning where have some key metrics landed today versus maybe where they've been a few years ago? And how much opportunity do you see there to whether it's speed of service or customer satisfaction, just other ways you measure?

[Jake Bartlett, Senior Equity Research Analyst at Truist Securities]

I'm just trying to understand really what the opportunity is here.

[Ryan Ostrom, EVP - Chief Customer & Digital Officer at Jack in the Box]

And when we look at the operational opportunities under Jack's Way, it's really going back to the basics. And it's just like Lance said, but it's going be really focused. When we look at that overall guest experience and satisfaction, one of the key drivers of that will be overall accuracy as well as friendliness, of the execution at our stores. And that's really what we're going to focus on for the next six months as well as just making sure they're consistent quality. When you look at consistent quality, it's just making sure as you're looking at our fries, you're looking at our burgers, you're looking at our core items, that we're consistently executing that quality on an ongoing basis.

[Ryan Ostrom, EVP - Chief Customer & Digital Officer at Jack in the Box]

And we're really going to get the field focused. We're getting our team members focused, and we're going to stay on that topic for some time to make sure we're reassured what Jack's way means all the way down to the team member.

[Jake Bartlett, Senior Equity Research Analyst at Truist Securities]

Great. And there's another concept out of the not in the QSR segment had made comments about Hispanic consumer and impact in certain markets. I think kind of timed around the protests in Los Angeles and the reactions, all the headlines that were hitting as well at that time. Is that the that advantage in that kind of series of event? Did that have a big impact on Jack in the Box same store sales?

[Jake Bartlett, Senior Equity Research Analyst at Truist Securities]

Has it improved as you've we've gotten further from that time? I'm trying to understand the impact of some of the environmental stuff that's going on right now and whether that's whether you're seeing or are seeing some sort of change in trajectory there?

[Lance Tucker, CEO & Director at Jack in the Box]

Jake, we it's been honestly pretty consistent, for us over the last really since, you know, the beginning of the year, call it. It has not been acute. It doesn't mean you, you know, you don't have a a day or two where it's worse here and there. But by and large, it's really been pretty consistent, and and that's kind of attributable to our footprint, I think. If you look at where we're heavy, footprint, we're obviously huge in California and Texas and then throughout the Southwest.

[Lance Tucker, CEO & Director at Jack in the Box]

And so, you know, it's been relatively constant for us.

[Operator]

And your final question comes from the line of Alex Slagle with Jefferies. You may go ahead.

[Alex Slagle, Equity Research Analyst at Jefferies]

All right. Thanks for putting me in. I want to ask on the remodels. I know it's early to talk about the new program, but kinda curious what the franchisee interest looked like on the original program when you kinda set that up and sort of what the franchisee conversation looked like?

[Lance Tucker, CEO & Director at Jack in the Box]

You know, Alex, it was it was actually very favorable. We, you know, kinda I don't remember if it was this time last year or maybe a little bit earlier in the year in 2024, we went out and said that the company is going to do a significant contribution, of $50,000,000 and we're only able to touch about 300 to 400 restaurants with that contribution. And we took applications for it and we had, as I recall, over 1,000 applications. And so the interest was really high. So what we're going to do here, I think when you look at our system, honestly, touching 300 to 400 restaurants isn't nearly enough when you look at across our system.

[Lance Tucker, CEO & Director at Jack in the Box]

So we are going to attempt to touch an additional 1,000, which honestly ought to get us to a spot where we've touched the vast majority of the system when we're finished with it. And it'll be a meaningful contribution from corporate. I'm not ready to give the exact numbers quite yet. We'll do that in November. But you can look and say, well, gosh, we did $50,000,000 before and it touched 300 to 400,000,000 So if you're looking for kind of a guidepost, that would at least give you a feel for what an additional contribution would look like.

[Lance Tucker, CEO & Director at Jack in the Box]

And the reason we're not giving quite as much detail yet from a timing standpoint, as you would imagine, I want to get through the next few quarters and get a little bit of the debt paid down and kind of get through that first part of Jack on track. And then once we're in a position to start making big significant contributions to reimages, that would be the plan. I think the franchisees will be excited. They they certainly were when we did this last year.

[Alex Slagle, Equity Research Analyst at Jefferies]

For sure. Yeah. That's helpful. And on the franchisee store closures part of the the Jack on track program, the block closures. I guess there were 13 in the third quarter and just trying to think about the cadence of the remaining balance, like, what might show up in the four q?

[Alex Slagle, Equity Research Analyst at Jefferies]

And I know it's a range of 80 to a 120 through the calendar year. So I don't know if you can narrow that down at all just to get us a little closer.

[Lance Tucker, CEO & Director at Jack in the Box]

You know, Alex, I can I can probably give you a little tighter range on that by the end of the fiscal year, but there are still a lot of conversations happening? That's the reason we haven't narrowed it down too much. But but I would think of the, you know, let's call it remaining 65 plus for the remainder of the calendar year or 70 plus for remainder of the count or of the calendar year, you know, at least half of those, probably a little bit more will happen in the fiscal year. And then you'll see as you as you get going through the program throughout the rest of the program, you'll see the remainder of the kind of the early closures and the ones that are pulling forward against their franchise agreement happening in '26. And then everything else will just fall pretty evenly according to when franchise agreements, run through.

[Lance Tucker, CEO & Director at Jack in the Box]

So I don't know if that was at all helpful, but, you know, we'll we'll get a good bit of them done by the end of the fiscal year, but I don't think it'll be all of them.

[Alex Slagle, Equity Research Analyst at Jefferies]

Got it. All right. Thanks for that.

[Lance Tucker, CEO & Director at Jack in the Box]

Okay. Thank you.

[Operator]

This concludes today's question and answer session.

[Lance Tucker, CEO & Director at Jack in the Box]

All right. Thanks, everybody.

[Operator]

Thank you for joining the call. You may disconnect.

Participants

Executives

• Ryan Ostrom, EVP - Chief Customer & Digital Officer

Analysts

• Rachel Webb, VP - Finance & IR at Jack in the Box
• Lance Tucker, CEO & Director at Jack in the Box
• Dawn Hooper, EVP & CFO at Jack in the Box
• Brian Bittner, Senior Equity Analyst - Restaurants at Oppenheimer & Co. Inc.
• Arian Razai, VP - Equity Research at Guggenheim Securities
• Jon Tower, Director - Equity Research - Consumer & Restaurants at Citigroup
• Teddy Farley, Equity Research Associate at Goldman Sachs
• Jim Sanderson, Equity Research Analyst at Northcoast Research
• Ella Zhou, Equity Research Associate at Stifel Financial Corp
• Jake Bartlett, Senior Equity Research Analyst at Truist Securities
• Alex Slagle, Equity Research Analyst at Jefferies