Jack in the Box Inc. (NASDAQ:JACK) Q4 2022 Earnings Call Transcript

And then the last thing is this SG&A question, and we believe as we walk you through SG&A tech and margins, it’s going be explainable. Most — if you think about Del Taco, we have only had them now for two quarters, a lot of the synergies that we expected in ongoing expenses in SG&A will start to improve as we move into 2024. And I will let Tim unpack that for you.

Tim Mullany: Yeah. Brian, absolutely. Great question. So as we noted in our comments, we are guiding 2023 SG&A at $160 million to $170 million. When you look at fiscal year 2022 consolidated SG&A, excluding our pre-opening expense, we are roughly $130 million. The walk between that $130 million to our guide of $160 million to $170 comprises a few things. One, roughly of the unique and one-time items that we mentioned. Those represent roughly 25% of the non-Del Taco item drivers. Those would be things like primarily two items, so favorable insurance adjustments that we had in FY 2022 that are not recurring in 2023 and similarly we added Chicken settlement in the prior fiscal year that benefited us that we won’t have that benefit as we go into FY 2023.

The remaining non-Del Taco items are wage and incentive comp increases and share-based compensation. Outside of that, the primary driver of the increase is the incremental Del Taco SG&A component, as Darin mentioned, we had seven-and-a-half months or so of Del Taco consolidated into our FY 2022 results. This guide obviously includes a full year of the Del Taco G&A inside of it. So it’s a fairly clean walk of items, we have two unique items, as I mentioned, insurance cost increases, legal settlements that are not recurring and then the remaining outside consolidating just Del Taco and Jack in the Box G&A, the remaining items are related to wage and incentive comp and share comp — compensation.

Darin Harris: And as you think about share compensation, as we hired a new management team in Del Taco over, it took some time for those shares to begin vesting and so that — the growth of that expense will not grows meaningfully in future years.

Brian Bittner: Great. Thanks. I must — oh, sorry. Go ahead.

Tim Mullany: Yeah. Brian, if we could — I will just add one more point to this. We do anticipate further savings in active reduction of this G&A figure, so we want to post that for the investment community here. A lot of this will be as a direct result of the acquisition of Del Taco. The synergies that we are anticipating and the G&A cost reductions aren’t taking hold meaningfully yet in 2023. We do expect to achieve meaningful G&A reductions in 2024. It’s just — the integration process is stretching mostly beyond FY 2023.

Brian Bittner: Thank you. Thank you for the details on the sales and the EPS guidance. Appreciate it.

Operator: Your next question is from the line of Lauren Silberman with Credit Suisse. Your line is open.

Lauren Silberman: Thank you guys for the question. I wanted to ask about unit growth, returning to positive growth for Jack in 2023. Great to see the growth in the pipeline. Just first with respect to 2023. To what extent are delays impacting gross opens and as we think about closures in 2023, should we start to see those normalize, are you still working through optimization efforts. And then, secondly, looking ahead, can you just talk about your visibility and confidence in stepping up the unit growth to the long-term 4% target? Thank you.